Document of
THE WORLD BANK
Report No. 27166
PROJECT PERFORMANCE ASSESSMENT REPORT
GUINEA
SECOND STRUCTURAL ADJUSTMENT CREDIT
(Credit 1926-GUI)
PUBLIC ENTERPRISE SECTOR RATIONALIZATION AND PRIVATIZATION
TECHNICAL ASSISTANCE CREDIT
(Credit 2398-GUI)
FINANCIAL SECTOR ADJUSTMENT CREDIT
(Credit 2653-GUI)
THIRD STRUCTURAL ADJUSTMENT CREDIT
(Credit 3021-GUI)
FOURTH STRUCTURAL ADJUSTMENT CREDIT
(Credit 3551-GUI)
October 31, 2003
Country Evaluation and Regional Relations
Operations Evaluation Department
Currency Equivalents
(Annual Average; Guinean Francs per US $)
(Source: IMF, International Financial Statistics)
Year Guinean Franc (GNF) Year Guinean Franc (GNF)
1988 550.0 1995 998.0
1989 620.0 1996 1,039.1
1990 680.0 1997 1,145.0
1991 803.0 1998 1,298.0
1992 922.4 1999 1,736.0
1993 972.4 2000 1,882.3
1994 981.0 2001 1,988.3
2002 1,976.1
Abbreviations and Acronyms
AfDB African Development Bank
BCRG Banque Centrale de la Republique de Guinee
BIAG Banque Internationale pour l’Afrique en Guinee
CP Comite de Privatisation
DCA Development Credit Agreement
DNMPPE Direction Nationale des Marches Publics et du Portefeuille de l’Etat
ESAF Enhanced Structural Adjustment Facility
FSAC Financial Sector Adjustment Credit
GDP Gross domestic product
GNF Guinean Franc
GOG Government of Guinea
HIPC Heavily Indebted Poor Countries
IDA International Development Association
IMF International Monetary Fund
LDP Letter of Development Policy
MEF Ministry of Economy and Finance
MTEF Medium-term expenditure framework
OED Operations Evaluation Department
PATSEP Public Enterprise Sector Rationalization and Privatization Technical
Assistance Project
PEMAC Public Expenditure Management Adjustment Credit (SAC III)
PEs Public enterprises
PPAR Project Performance Assessment Review
PR President’s Report
PRGF Poverty Reduction and Growth Facility
SAC Structural Adjustment Credit
Director-General, Operations Evaluation : Mr. Gregory K. Ingram
Director, Operations Evaluation Department : Mr. Ajay Chhibber
Senior Manager, Country Evaluation and Regional Relations : Mr. R. Kyle Peters
Task Manager : Ms. Poonam Gupta
PPAR prepared by : Mr. Delbert Fitchett
OED Mission: Enhancing development effectiveness through excellence and independence in evaluation.
About this Report
The Operations Evaluation Department assesses the programs and activities of the World Bank for two
purposes: first, to ensure the integrity of the Bank’s self-evaluation process and to verify that the Bank’s work is
producing the expected results, and second, to help develop improved directions, policies, and procedures through
the dissemination of lessons drawn from experience. As part of this work, OED annually assesses about 25 percent of
the Bank’s lending operations. In selecting operations for assessment, preference is given to those that are
innovative, large, or complex; those that are relevant to upcoming studies or country evaluations; those for which
Executive Directors or Bank management have requested assessments; and those that are likely to generate
important lessons. The projects, topics, and analytical approaches selected for assessment support larger evaluation
studies.
A Project Performance Assessment Report (PPAR) is based on a review of the Implementation Completion
Report (a self-evaluation by the responsible Bank department) and fieldwork conducted by OED. To prepare
PPARs, OED staff examine project files and other documents, interview operational staff, and in most cases visit
the borrowing country for onsite discussions with project staff and beneficiaries. The PPAR thereby seeks to
validate and augment the information provided in the ICR, as well as examine issues of special interest to broader
OED studies.
Each PPAR is subject to a peer review process and OED management approval. Once cleared internally, the
PPAR is reviewed by the responsible Bank department and amended as necessary. The completed PPAR is then
sent to the borrower for review; the borrowers' comments are attached to the document that is sent to the Bank's
Board of Executive Directors. After an assessment report has been sent to the Board, it is disclosed to the public.
About the OED Rating System
The time-tested evaluation methods used by OED are suited to the broad range of the World Bank’s work.
The methods offer both rigor and a necessary level of flexibility to adapt to lending instrument, project design, or
sectoral approach. OED evaluators all apply the same basic method to arrive at their project ratings. Following is
the definition and rating scale used for each evaluation criterion (more information is available on the OED website:
http://worldbank.org/oed/eta-mainpage.html).
Relevance of Objectives: The extent to which the project’s objectives are consistent with the country’s current
development priorities and with current Bank country and sectoral assistance strategies and corporate goals
(expressed in Poverty Reduction Strategy Papers, Country Assistance Strategies, Sector Strategy Papers,
Operational Policies). Possible ratings: High, Substantial, Modest, Negligible.
Efficacy: The extent to which the project’s objectives were achieved, or expected to be achieved, taking into
account their relative importance. Possible ratings: High, Substantial, Modest, Negligible.
Efficiency: The extent to which the project achieved, or is expected to achieve, a return higher than the
opportunity cost of capital and benefits at least cost compared to alternatives. Possible ratings: High, Substantial,
Modest, Negligible. This rating is not generally applied to adjustment operations.
Sustainability: The resilience to risk of net benefits flows over time. Possible ratings: Highly Likely, Likely,
Unlikely, Highly Unlikely, Not Evaluable.
Institutional Development Impact: The extent to which a project improves the ability of a country or region to
make more efficient, equitable and sustainable use of its human, financial, and natural resources through: (a)
better definition, stability, transparency, enforceability, and predictability of institutional arrangements and/or (b)
better alignment of the mission and capacity of an organization with its mandate, which derives from these
institutional arrangements. Institutional Development Impact includes both intended and unintended effects of a
project. Possible ratings: High, Substantial, Modest, Negligible.
Outcome: The extent to which the project’s major relevant objectives were achieved, or are expected to be
achieved, efficiently. Possible ratings: Highly Satisfactory, Satisfactory, Moderately Satisfactory, Moderately
Unsatisfactory, Unsatisfactory, Highly Unsatisfactory.
Bank Performance: The extent to which services provided by the Bank ensured quality at entry and
supported implementation through appropriate supervision (including ensuring adequate transition arrangements
for regular operation of the project). Possible ratings: Highly Satisfactory, Satisfactory, Unsatisfactory, Highly
Unsatisfactory.
Borrower Performance: The extent to which the borrower assumed ownership and responsibility to ensure
quality of preparation and implementation, and complied with covenants and agreements, towards the
achievement of development objectives and sustainability. Possible ratings: Highly Satisfactory, Satisfactory,
Unsatisfactory, Highly Unsatisfactory.
i
Contents
Ratings and Responsibilities .......................................................................................... iii
Preface ................................................................................................................................v
Summary.......................................................................................................................... vii
1. Introduction ...........................................................................................................1
Scope of Report..................................................................................................1
Country Background..........................................................................................1
2. Second Structural Adjustment Credit ................................................................3
3. Public Enterprise Sector Rehabilitation and Privatization TA Credit.............7
4. Financial Sector Adjustment Credit ..................................................................11
5. Third Structural Adjustment Credit .................................................................15
6. Fourth Structural Adjustment Credit ...............................................................18
7. Key Lessons Learned...........................................................................................26
Text Tables
Table 1.1: IDA Approved Credits to Guinea ......................................................................1
Table 1.2: Selected Macroeconomic Indicators, 1989–2002..............................................3
Annexes
Annex A: Macroeconomic Indicators, 1987–2002...............................................29
Annex B: IDA Performance in SAC II ................................................................31
Annex C: IDA Performance under the Financial Sector Adjustment Credit .......33
Annex D: GOG Budgetary Performance in Priority Sectors under SAC III........35
Annex E: IDA Performance in SAC III ...............................................................37
Annex F: SAC IV Credit Effectiveness and Tranche Release Conditions ..........39
Annex G: Individuals Contacted/Interviewed ......................................................45
Annex H: Basic Data Sheets.................................................................................51
Annex I: Comments Received from the Government ........................................61
Comments Received from the Government
(Translation of French letter) ...............................................................73
Annex J: OED Response to Government Comments..........................................85
Annex Tables
Annex Table 1: Actual GOG Expenditures in Priority Sectors, 2000–2002 ........43
Annex Table 2: IDA Reports, 1966–2002 ............................................................49
This report was prepared by Delbert Fitchett (Consultant), with Poonam Gupta as Task
Manager. Betty Casely-Hayford and Agnes Santos provided administrative support.
iii
Ratings and Responsibilities
Second Structural Adjustment Credit (Credit 1926)
ICR Review PPAR
Outcome Moderately Unsatisfactory Unsatisfactory
Sustainability Uncertain* Unlikely
Institutional Development Negligible Negligible
Bank Performance Unsatisfactory Highly Unsatisfactory
Borrower Performance Unsatisfactory Highly Unsatisfactory
Public Enterprise Sector Rationatization and Privatization TA (Credit 2398)
ICR Review PPAR
Outcome Unsatisfactory Unsatisfactory
Sustainability Unlikely Unlikely
Institutional Development Negligible Negligible
Bank Performance Highly Unsatisfactory Highly Unsatisfactory
Borrower Performance Unsatisfactory Highly Unsatisfactory
Financial Sector Adjustment Credit (Credit 2653)
ICR Review PPAR
Outcome Unsatisfactory Moderately Unsatisfactory
Sustainability Uncertain* Unlikely
Institutional Development Negligible Negligible
Bank Performance Unsatisfactory Unsatisfactory
Borrower Performance Satisfactory Unsatisfactory
Third Structural Adjustment Credit (PEMAC) (Credit 3021)
ICR Review PPAR
Outcome Unsatisfactory Unsatisfactory
Sustainability Unlikely Unlikely
Institutional Development Modest Modest
Bank Performance Unsatisfactory Unsatisfactory
Borrower Performance Unsatisfactory Unsatisfactory
Fourth Structural Adjustment Credit (Credit 3551)
ICR Review PPAR
Outcome Moderately Satisfactory Unsatisfactory
Sustainability Not evaluable Unlikely
Institutional Development Substantial Modest
Bank Performance Satisfactory Unsatisfactory
Borrower Performance Satisfactory Unsatisfactory
* Terminology not currently used in OED rating system.
iv
Key Project Responsibilities
Project Staff Appraisal Completion
SAC II Task Manager Hasan Tuluy Alain Thery
Division Chief Pierre Landell-Mills Birger Fredriksen
Director/Country Director Ismail Serageldin Jean-Louis Sarbib
ICR prepared by AF5CO
PATSEP Task Manager Hiroaki Suzuki P. Morin
Division Chief Mamadou Dia S. Sagari
Country Director Michael Gillette Mamadou Dia
ICR prepared by S. Archondo and P. Morin
FSAC Task Manager Andre Yba Cherif Azi
Division Chief Iain Christie Gerard Bynam
Country Director Olivier Lafourcade Mamadou Dia
ICR prepared by Abdoulaye Yero Balde
SAC III Task Manager Brian Ngo Ezzedine Larbi
Division Chief Peter Harold/Emmauel Akpa Emmanuel Akpa
Country Director Mamadou Dia Mamadou Dia
ICR prepared by Ezzedine Larbi
SAC IV Task Manager Brian Ngo Ezzedine Larbi
Division Chief/Manager Emmanuel Akpa Emmaneul Akpa
Country Director Mamadou Dia Mamadou Dia
ICR prepared by Ezzedine Larbi
v
Preface
This is the Project Performance Assessment Report for the Second Structural
Adjustment Credit (C1926-GUI), the Public Enterprise Sector Rationalization and
Privatization Technical Assistance Credit (C2398-GUI), the Financial Sector Adjustment
Credit (C2653-GUI), the Third Structural Adjustment (C3021-GUI) and the Fourth
Structural Adjustment Credit (C3551-GUI). This is the first review of IDA’s policy
lending activities in Guinea since the issuance of the SAC I PPAR on June 25, 1990.
The SAC II Credit, for US$65.0 million was approved on June 16, 1988, became
effective on March 2, 1989, and closed on December 31, 1993.
The Public Enterprise Sector Rationalization and Privatization Technical
Assistance (PATSEP) Credit for US$7.3 million was approved on June 23, 1992, became
effective on September 15, 1993, and closed on December 31, 1995. US$3.15 million
were cancelled when the Credit was closed.
The Financial Sector Adjustment Credit for US$23 million was approved on
October 18, 1994 and became effective on December 23, 1994. US$0.35 million was
cancelled when the Credit was closed on December 31, 1998.
The SAC III Credit for US$70 million was approved on December 16, 1997 and
became effective on December 23, 1997. The Credit was fully disbursed in two tranches
and closed on December 23, 1998.
The SAC IV Credit for US$50 million was approved on July 24, 2001 and
became effective on August 9, 2001. The Credit was fully disbursed at effectiveness and
closed on June 30, 2002.
This PPAR is based on President’s Reports (PRs), legal documents, project files,
economic reports prepared during the period of execution of the projects, documents
from the International Monetary Fund, interviews with current and former Government
Officials (during a mission that visited Guinea in February/March 2003), discussions with
IDA staff formerly and currently involved directly in the credits or the lending program
to Guinea, Implementation Completion Reports (ICRs) and OED ICR Reviews. The
cooperation and the assistance of all those contacted in the preparation of this Report
were very useful and are gratefully appreciated.
This report was sent to the Government on August 7, 2003 and their comments
are attached as Annex I. Comments from the region are also incorporated in the report.
vii
Summary
1. Attached is the Project Performance Assessment Report (PPAR) for five credits
extended to Guinea during the period 1988 to 2001. The main objectives of the five
operations were to support a series of macroeconomic and sectoral reforms and to cover
serious fiscal and current account deficits. Concurrent operations, not covered in this
PPAR, sought to address problems in the Government of Guinea’s (GOG’s)
implementation capacities related to some of these credits. Policy-based lending
operations accounted for less than one-quarter of the IDA’s lending to the country during
this period. IDA disbursements to Guinea during 1988–2002 totaled about US$1 billion.
2. After initial achievements in the transition to a market-oriented economy in the
mid-1980s, progress in economic reform was stop and go. Completion of IMF
macroeconomic stabilization programs has been problematic, growth has been uneven,
and dependence on external concessional donor flows has intensified. Guinea has
become a heavily indebted poor country (HIPC). The donor community is concerned
about poor governance and corruption.1
3. This PPAR rates the outcome of the Second Structural Adjustment Credit as
unsatisfactory, rather than moderately unsatisfactory as in the ICR Review.
Sustainability is rated as unlikely, compared to uncertain in the ICR Review, and the
institutional development impact is rated as negligible, the same as in the ICR Review.
Both IDA and borrower performance are rated as highly unsatisfactory, compared to
unsatisfactory in the ICR Review.
4. The PPAR rates the outcome, sustainability, and institutional development impact
of the Public Enterprise Sector Rationalization and Privatization TA Credit as
unsatisfactory, unlikely and negligible respectively, the same as the ICR Review. IDA
performance is rated highly unsatisfactory, as in the ICR Review, and borrower
performance is also rated highly unsatisfactory, down from unsatisfactory in the ICR
Review.
5. The PPAR rates the outcome of the Financial Sector Adjustment Credit as
moderately unsatisfactory, rather than the ICR Review rating of unsatisfactory.
Sustainability is considered unlikely, rather than uncertain. The PPAR and the ICR both
rate institutional development impact as negligible. The PPAR concurs with the ICR
Review rating of unsatisfactory for IDA performance, and also rates borrower
performance as unsatisfactory, rather than satisfactory, as in the ICR Review.
6. As regards the Third Structural Adjustment Credit, the PPAR agrees with the ICR
Review with respect to all of the ratings: outcome is unsatisfactory, sustainability is
1
The most recent country strategy of the World Bank and the U.S. Department of State Country Reports on Human
Rights Practices: 2002 (March 31, 2003) cite such concerns. The donor community made similar observations to OED
during interviews in Guinea conducted for this PPAR.
viii
unlikely, institutional development impact is modest, and both IDA and borrower
performance are unsatisfactory.
7. Finally, the PPAR rates the outcome of the Fourth Structural Adjustment Credit
as unsatisfactory, rather than the ICR Review rating of moderately satisfactory. It rates
sustainability as unlikely, compared to non-evaluable, and institutional development
impact as modest, compared to substantial in the ICR Review. Finally, both IDA and
borrower performance are rated as unsatisfactory, rather than the ICR Review ratings of
satisfactory.
8. The main lessons derived from these operations for the Bank are:
• Adjustment lending operations should be underpinned by a high quality and
adequate ESW program;
• Time-bound, monitorable indicators should be used to verify performance;
• Both revenue and expenditure issues should be addressed in reducing fiscal
deficits;
• Single tranche credits should be used only when the government has an
established track record of good policy performance;
• IDA staff re-assignments should not be disruptive to IDA operations and
client relations;
• Timely warning should be given to management and the Board of rising IDA
risk exposure from an unsustainable debt burden; and
• Donor lending can create incentives to mismanage the economy.
Gregory K. Ingram
Director-General
Operations Evaluation
1
1. Introduction
Scope of the Report
1.1 During the last 14 years—since FY88—IDA has approved 34 credits to Guinea
for US$966.1 million.2 This PPAR addresses five operations for US$215.4 million
approved in this period. These are summarized in table 1.1.
Table 1.1: IDA Approved Credits to Guinea
Commitment Board Effectiveness Closing
Operation Name Credit No. Amount ($ m.) Approval Date Date Date
SAC II 1926-GUI 65.1 6/16/1988 3/2/1989 12/31/1993
Public Enterprise Sector
Rationalization and
Privatization Technical
Assistance (PATSEP) 2398-GUI 7.3 06/23/1992 09/15/1993 12/31/1995
Financial Sector
Adjustment 2653-GUI 23.0 10/18/1994 12/23/1994 12/31/1998
SAC III (PEMAC) 3021-GUI 70.0 12/16/1997 12/23/1997 12/23/1998
SAC IV 3551-GUI 50.0 7/24/2001 08/09/2001 06/30/2002
Total IDA Commitments
(US$ million) 215.4
Note: Commitments are not adjusted for subsequent cancellations.
Country Background
1.2 In 1958, the Guinean Government of Sekou Toure was granted independence.
The leader of the independence movement, Sekou Toure, remained the dominant figure
in Guinean politics until his death in 1984. During the more than quarter century of his
leadership, the economy was mismanaged on a colossal scale, and political and economic
oppression engendered a massive outflow of human and financial resources from the
country. The institutions and policies implanted during those decades continue to
represent a drag on the efforts of the Guinean people to improve economic well-being.
With the death of Sekou Toure in 1984, there ensued a brief period of political instability
from which the army emerged in control, under the leadership of today’s president,
Lansana Conte.
1.3 The change of regime in 1984 brought with it the initiation of changes in
economic policies, to undo the economic havoc wrought by the policies of the Toure
regime. Under the Programmes de Reformes Economiques et Financieres (PREF), the
government began to dismantle the centrally planned economy, encourage private sector
participation and attract foreign investment. The measures included attempts to restore
fiscal balance, a massive devaluation of the grossly overvalued currency, privatization or
liquidation of the numerous state-owned enterprises, restructuring and privatizing the
financial system, and a reduction of the bloated, poorly remunerated public sector
2
These data are from the World Bank external web site. The figures have not been adjusted for cancellations. They
exclude a Commercial Debt Reduction Program Project Grant for US$10.5 million, a Rural Energy Project GEF Grant
for US$2 million and HIPC debt reduction operations.
2
bureaucracy. While the World Bank Group had commenced operating in Guinea on a
modest scale as early as 1966 (the Boke infrastructure project), the economic policy
reorientation initiated by the military government in the mid-1980s attracted early and
expanded support from both the Bank Group and the IMF. The intensified Bank Group
support initially focused on the severe problems of the deteriorated public sector
infrastructure and the failure of the previous regime to extend public services to the rural
sector. However, opportunities arose early on for IDA—in conjunction with the IMF—to
support the economic reform programs being carried out by the military government
through quick-disbursing policy-based lending operations.
1.4 While some headway was being made in the initial transition from a state-
controlled economy to a liberalized private sector driven economy in the mid-80s,
subsequent progress tended to be in fits and starts, with occasional backsliding.
Compliance with the conditions of continued IMF support was—and has continued to
be—problematic, of an “off again, on again” nature. Over the approximately decade and
a half covered by this PPAR, the Guinean economy continued to be highly—and
increasingly—dependent on the external donor community for concessionary loans,
grants or debt forgiveness (annex A). As IDA sought to support the reform process
through a series of structural and sectoral adjustment credits, as well as project lending
operations, IDA's risk exposure rose significantly. The IMF engaged in a series of
support operations of varying success. The GOG’s performance is reflected in the Bank’s
recent assessment rating exercise, where Guinea is placed in the fourth (next to lowest)
quintile. Owing to problems with the GOG’s implementation of its macroeconomic
program, the IMF put in place a Staff Monitored Program (SMP) in 2001 instead of its
regular arrangements for support. At the end of January 2003, the IMF determined that
the Government failed to meet critical performance criteria, and terminated the Guinea’s
Poverty Reduction and Growth Facility (PRGF) program. Agreement on a new program
has yet to be reached and according to the IMF staff, not even an SMP would be in place
this year.
1.5 The performance of the Guinean economy has been weak.3 The indicators of
macroeconomic performance and economic viability over the period in which the
operations reviewed here were carried out are presented in table 1.2. They show that the
period was characterized by: per capita GDP growth rates that were insufficient to
reduce poverty;4 persistent inadequate domestic fiscal resource mobilization and
continued external imbalance; steadily rising external donor dependence; and the
accumulation of an unsustainable debt burden, despite progressively softer external
borrowing terms and substantial grant assistance, culminating in external debt
forgiveness.
3
The recent World Bank assistance strategy observes that “Since the 1997 CAS, Guinea had modest growth, and this
growth was not translated into significant poverty reduction.” The introduction by the IMF of a Staff Monitored
Program—and the suspension of the PRGF—is further evidence of poor macroeconomic performance. Government
officials are of the view that “the country’s macroeconomic and financial performance would have merited a more
positive rating if the report had taken into account the state of affairs in the sub region, which has been plagued since
1989 by serious armed conflict that has driven hundreds of thousands of refugees and displaced persons into Guinean
territory.”
4
Average GDP growth during 1991-2000 was 3.9 percent, however, per capita growth rates were modest because of
high population growth rates.
3
Table 1.2: Selected Macroeconomic Indicators, 1989–2002
1989 1990 1991–1995 1996 1997 1998 1999 2000 2001 2002
Real Per Capita GDP:
a. 1995 US $ 527 534 538 572 585 598 605 603 607 n.a
b. Growth (% p.a.) 1.0 1.4 1.0 2.0 2.3 2.2 1.3 -0.3 0.7. n.a
CPI (annual average) (%) 28.3 19.4 10.6 3.0 1.9 5.1 4.6 6.8 5.4 3.0
Overall budget balance (commitment basis) as a % of GDP:
a. Including grants -5.0 -5.2 -3.6 -3.0 -2.9 -0.7 -3.0 -3.2 -4.1 -5.9
b. Excluding grants -8.7 -7.4 -8.8 -6.1 -5.9 -3.6 -5.4 -5.6 -7.2 -8.2
External current account balance (% of GDP):
a. Including official transfers and
grants -4.9 -5.6 -5.5 -4.4 -3.1 -2.6 -4.2 -2.9 -2.4 -6.1
b. Excluding official transfers
and grants -8.9 -9.5 -9.1 -7.3 -6.3 -6.0 -7.2 -6.5 -3.8 -7.5
Source: Annex A.
1.6 According to a recent paper by the Center for Global Development, Guinea
moved from the status of “low multilateral debtor” to “high multilateral debtor” in 1993.5
During the period 1987–2002, IDA disbursed approximately US$1 billion to Guinea.
Nevertheless, IDA’s economic reporting and risk assessment practices do not appear to
have identified the impending debt sustainability issue in a timely manner to IDA
management or the Board. Furthermore, the country strategy presented to the Board in
1997 did not highlight IDA’s rising exposure or the likely need for IDA debt relief. In
November 2000, the Board approved US$234 million of IDA debt relief to Guinea, as the
country entered the HIPC/PRGF ranks.6
1.7 In the regional context, there have been internal political unrest, border security
problems, and refugee movementswith related economic impactsowing to border
disputes with Guinea’s southern neighbors of Sierra Leone, Liberia, and Cote d’Ivoire.
Illegal trade in precious minerals and gems also is a problem. Rumors of corruption
persist.
2. Second Structural Adjustment Credit
Objectives
2.1 The Guinea Second Structural Adjustment Credit (SAC II), Credit 1926-GUI, for
US$65.1 million, was approved in FY88 and closed in FY94. The Credit represented a
continuation of IDA support to the Government’s economic liberalization and reform
program under SAC I. The objective of the Credit was to support reform of public sector
5
Birdsall, Nancy, Stijn Claessens, and Ishac Diwan. 2002. Policy Selectivity Foregone: Debt and Donor Behavior in
Africa. CGD Working Paper No. 17. Washington, D.C.: Center for Global Development, p. 17.
6
World Bank Internal Report.
4
management and to strengthen the incentives environment for private sector activity
through:
• Rationalization of the civil service;
• Implementation of resource mobilization and financial management measures;
• Continuation of public enterprise (PE) reforms;
• Further legal and institutional measures to promote private sector
development; and
• Development of a comprehensive social policy.
2.2 A further primary—if formally unstated—objective of the SAC II was to rapidly
address an urgent short-term balance of payments gap. In association with this credit,
additional external support from the African Development Bank (AfDB), the
Government of Japan, the Government of France, the Government of the United States of
America and the European Community raised the total financing package to
US$135 million.
Relevance
2.3 The objectives of supporting reform in public sector management in the SAC II
operation were relevant. The civil service was a very large part of the formal sector labor
force, it was inadequately trained, inefficient, poorly paid and corruption was rife. Fiscal
revenues were overly dependent on the aluminum export sector, while public sector
expenditure management systems were wholly inadequate. The formal sector continued
to be dominated by poorly performing government-owned enterprises, the magnitude of
whose loses were difficult to determine owing to inadequate management information
and accounting systems. The private investment climate and the legal underpinnings
thereto were extraordinarily unfavorable and social policies were inadequate to meet
ongoing needs and to ameliorate the social impacts of adjustment.
Implementation Experience
2.4 The preparation of the SAC II was initiated in mid-1987, together with a mission
on the (belated) release of the second tranche of SAC I. The Board approved the SAC II
for US$65 million on June 16, 1988. However, effectiveness was delayed twice until
March 2, 1989, owing to GOG delays in meeting effectiveness conditions.7 The second
tranche release had been planned to occur before the end of FY90. Owing to GOG
failures to comply with the tranche release conditions, it was delayed on three occasions
until December 1992, three years later than the date at which the credit was expected to
be fully disbursed.8 An IDA reflow of US$70,000 became effective in May 1993. The
SAC II closed on December 31, 1993. The Credit was fully disbursed.
7
This was accomplished by transferring a Credit effectiveness condition relating to the national petroleum products
company over to becoming a second tranche release condition.
8
During this period, Guinea also fell out of compliance with its Fund-monitored enhanced structural adjustment
facility (ESAF).
5
Outcome
2.5 This Review considers the outcome of the SAC II as unsatisfactory, compared to
the moderately unsatisfactory rating in the ICR Review.
2.6 Rationalization of the civil service. Guinea reduced the number of civil servants
from about 100,000 in 1986 to fewer than 55,000 in 1993. An information system for the
management of the civil service was established and the personnel rolls were cleaned up,
but its operational impact on civil service management was negligible as changes in
procedures were not achieved within the anticipated 18-month timeframe of the SAC II
program. Also, after an initial period of lay-offs, in 1991 about 5,000 civil servants were
hired as “temporary personnel” but who in 1995 still remained on the payroll (when the
SAC II ICR was sent to the Board).
2.7 Resource mobilization and financial management measures. While fiscal revenue
mobilization from non-mining sources rose from 4.5 percent of GDP in 1988 to
7.1 percent of GDP in 1993 (in line with SAC targets), it failed to compensate fully for
the decline in mining revenue. As a result, fiscal revenue at the end of 1993 represented
only 11.6 percent of GDP, versus the 14 percent targeted in the program.
2.8 Public enterprise reforms. Progress in reform of PEs was uneven. The PR
anticipated that the PEs slated for liquidation would be closed in 1988 and liquidated in
1989. Numerical targets were not specified. After considerable delay, petroleum product
imports and resale activities were finally privatized.9 Two key public utility companies
in water and electricity distribution were transferred to private management contracts, but
arrangements with foreign operators were subsequently abrogated. Progress on other
publicly-owned companies continued to be slow and the transparency of some of the
arrangements was questionable.10
2.9 Development of a comprehensive social policy. An Interministerial Committee on
Social Policies was created, but it did not become operational. While the quality of the
dialogue with IDA with respect to these issues improved, the continuing difficult fiscal
situation impeded adequate resource allocation to address basic health.
Sustainability
2.10 This Assessment considers the Project’s sustainability unlikely, compared to the
ICR Review rating of uncertain.11 Fiscal revenues continued to fall short of
expenditures, aggravating the economy’s continued dependence on foreign grants and
concessional loans. Rationalization of the civil service and PE reform continued to be a
9
Originally a condition of effectiveness, this requirement was changed to a condition of second tranche release in order
to permit loan effectiveness to occur.
10
This view was shared by the region.
11
Government officials are of the view that “although some problems persist it must be acknowledged that noticeable
progress has been made in all the areas targeted by the project (e.g. streamlining of the civil service, improvement of
revenue mobilization, enhanced financial management, continued reform of public enterprises, modification of the
legal and institutional framework to encourage private sector development, and the development of a general social
policy.”
6
priority problem throughout the 90s. The legal and institutional environment for private
sector development remained poor.12 Persistent grave external resource gaps, weak
public expenditure control, an overstaffed, inefficient civil service and an unsatisfactory
and ineffective incentive framework to promote the development of the private sector
characterized Guinea in the 1990s.13 Maintenance of a satisfactory macroeconomic
framework has been a continuing problem.
Bank Performance14
2.11 Overall, IDA’s performance is rated as highly unsatisfactory, compared to the
ICR Review rating of unsatisfactory. SAC II was prepared in haste and rapidly presented
to the Board, after the release of the second tranche of SAC I, in order to bridge the
borrower’s financing gap perceived by IDA. In the rush to try to cover expected
immediate external resource shortages (“gap-fill”), IDA failed to adequately address
issues which had already arisen in the Guinean context. These were the widely
acknowledged weak government commitment to reform, and project conditionality that
was too unfocused and lacking in meaningful objectively verifiable indicators to assess
performance for use in the release of funds.15 The credit did not achieve the rapid
resource transfer objective; it was disbursed over five-and-a-half years instead of the
expected 18 months as conditions for effectiveness and for second tranche release met
with significant delays.
2.12 During FY88–90, IDA provided substantial additional credits, including a sectoral
adjustment project (the Private Sector Promotion SECAL) which eased the pressure on
public finances and also contributed to the delay/failure in the implementation of SAC II
reforms.
2.13 There were other shortcomings. While seven supervision missions of the Credit
were carried out, there is only one supervision report in the project files.16 The ICR was
not issued until June 28, 1995—a year-and-a-half after the project closing date. The
authorities failed to prepare an ICR or to submit comments on the IDA-prepared ICR.
The ICR’s assertion that “The Government’s assessment is unlikely to differ from that
contained in Part I [of the ICR], since it generally reflects the dialogue between both
parties during the SAC II period” appears dismissive of the client’s views. While the
ICR states that the Government’s response would be included in the project files, no
response could be found in files.
2.14 Despite the intensive policy-based lending program and associated advisory role
to the GOG being carried out by the Region in the second half of the 1980s, there were
12
The increase in private investments on which the growth projections had been predicated did not materialize. Instead,
large flows of external financial assistance helped boost domestic demand and generated growth.
13
World Bank Internal Report.
14
Further detail on this point is presented in annex B.
15
Conditionalities were wide-ranging, addressing the domestic prices of cement and rice, Central Government
organization, civil service testing and personnel reduction, accounting and budgetary practices, establishing a corporate
taxpayer role, and reform of public enterprises.
16
The extensive delays in borrower compliance with the second tranche release conditions led to a loss of staff
continuity during implementation, as no fewer than five task managers had responsibility for SAC II.
7
serious lacunae in the formal economic reporting on Guinea. The Region concentrated
excessive staff resources on the processing of short-term “quick fixes” to address the
external resource gap, rather than allocating sufficient staff resources to building a solid
analytical foundation for its future policy advice and lending program. For example,
during the period from 1986–02, there was one formal country economic report released
in 1990. A second report, a public expenditure review, was prepared only through the
final draft stage in 1996.
Borrower Performance
2.15 This Review considers that borrower performance was highly unsatisfactory,
compared to the ICR Review rating of unsatisfactory. The authorities were slow to
undertake the measures to which they had committed, delaying credit effectiveness and
second tranche release. Weak management capacity undermined performance and
contributed to repeated backsliding in carrying out SAC II commitments. The GOG failed
to comply with the Fund’s ESAF during part of this period. Finally, the GOG failed to
prepare and furnish to IDA its contribution to the ICR process, in violation of Article I,
section 1.01 (b) of the SAC II Development Credit Agreement (DCA).
Institutional Development Impact
2.16 This Review agrees with the ICR Review that the Project had negligible impact
on institutional development. The principal issues with respect to civil service reform,
public resource mobilization and management, privatization and reform of PEs, and the
legal and institutional framework for promoting the private sector were not addressed.
3. Public Enterprise Sector Rationalization and
Privatization Technical Assistance Credit
Objectives
3.1 The Public Enterprise Sector Rationalization and Privatization Technical
Assistance Project (PATSEP) Credit 2398-GUI in the amount of US$7.3 million
equivalent, was approved on June 23, 1992. It became effective on September 15, 1993
and was closed on December 31, 1995, the original closing date. US$3.15 million
equivalent was undisbursed and canceled from the loan. The Credit was not co-financed,
although Japanese Government Trust Funds were used in its preparation.
3.2 The project's objective was to help the Government prepare and implement a
program of PE reform and privatization to:
• reduce the size of the PE sector through privatization and/or liquidation;
• improve PE sector management through legal and institutional reform;
8
• carry out financial restructuring of principal PEs; and
• mitigate the social impact of reform.
3.3 In the late 1980s the project was originally envisioned as a “hybrid” one,
combining a quick-disbursing component to accompany major GOG PE policy initiatives
and a slower-disbursing technical assistance (TA) component—overall totaling as much
as US$25 million. However, this approach was ultimately rejected in favor of a standard
TA credit to support the divestiture program, including assistance for carrying out
privatization and/or liquidation of 46 targeted PEs, "corporatization" and management
contracts for other large PEs, legal reform to foster private sector development, and
design of redeployment programs for redundant PE employees. Technical assistance,
training, and equipment were also provided to reinforce Government's capacity to apply
more rigorous financial control and to develop a sound regulatory framework for
privatized public utilities. Of the Credit amount of US$7.3 million, about 79 percent was
to cover the costs of more than 200 months of consultants’ services. There was no quick
disbursing tranche. Disbursements were made in accordance with the standard
documentation for the provision of eligible goods and services under the project.
Relevance
3.4 The PATSEP objectives were relevant and consistent with IDA's strategy in
Guinea and were supported by some of the policymakers within the GOG. The PATSEP
was prepared to assist the Government to formulate and implement the second phase of
its divestiture program and to rationalize the PE sector.
Implementation Experience
3.5 The Board approved the Credit of US$7.3 million on June 23, 1992. There was a
prolonged delay in the Project’s being declared effective, as the GOG wrestled with the
various and numerous conditions of effectiveness. There were three extensions of the
original effectiveness date; it was only on September 15, 1993, 15 months after Board
approval, that the Credit became effective.17
3.6 In November 1993, the new Project Officer wisely convened a “Project
Relaunching” workshop in Washington in order to bring together the Guinean project
staff with the relevant IDA staff. This was followed by a project launch workshop in
Guinea in April 1994. The turnaround in project implementation performance was
reflected in the supervision report of February 24, 1994, in which numerous categories
were upgraded from a “3” rating to a “1” rating. However before the end of 1994,
responsibility for supervising the project again shifted to a different IDA Division, and a
new Project Officer took over. Subsequent to a supervision mission in November 1994,
the supervision report of January 26, 1995 noticeably downgraded a number of project
performance ratings.
17
Because of changes in the project, two of the pending effectiveness conditions were no longer relevant.
9
3.7 The project was scheduled to close on December 31, 1995, although much of the
credit amount had not yet been disbursed by mid-1995. The GOG authorities requested
an extension, but the Region adhered to the original closing date, and maintained an
“unsatisfactory” rating on the supervision report. Among the reasons for refusing the
authorities’ request for an extension of the Credit closing date were: the failure of the
Comite de Privatisation (CP) to operate effectively; lack of follow through with
privatization procedures set out in the DCA; disagreement with privatization procedures
followed for three PEs (Société des Télécommunications de Guinée (SOTELGUI), Office
de la Poste Guineenne (OPG), and Société des Bauxites de Kindia (SBK)); the lack of a
training and redeployment program for redundant employees; and an unacceptable PE
privatization action plan.
Outcome
3.8 This PPAR agrees with the ICR Review that the outcome of this project was
unsatisfactory. During the truncated implementation period PATSEP’s objectives were
not achieved. With respect to PE divestiture, six of the 46 PEs originally planned for
divestiture were actually divested. (Seven additional PEs included in the group were later
privatized without PATSEP involvement). Other enterprises were converted into
companies with GOG participation. The PE employee redeployment program and the
elaboration and implementation of a policy framework on the regulation of public utilities
envisaged under the project were not carried out.
3.9 The PE sector policy framework remained weak. The Government's capacity to
monitor PEs through the Direction Nationale des Marches Publics et du Portefeuille de
l’Etat (DNMPPE) was not improved. A decree on PEs and Statutes that classified PEs
into new categories was prepared, but had to be subsequently revised. The problem of
inter-PE cross debts was not satisfactorily addressed and the regulatory framework for
public utilities was not put in place.
Sustainability
3.10 The Review agrees with the ICR Review that the sustainability of the PATSEP’s
modest achievements is unlikely. In the absence of a divestiture action plan, a divesture
program could not be sustained with appropriate standards of transparency and
competition. The management of the PE sector was assigned to the DNMPPE which had
no special expertise and no special advantage in the areas of divestiture and portfolio
management.18 Several of the privatization activities of the PATSEP were brought under
the subsequent SAC IV operation.
18
The GOG comments on the PPAR point out that the DNMPPE has never been in charge of managing public
enterprises. It monitors them on behalf of the government.
10
Bank Performance
3.11 This Review agrees with the ICR Review that IDA’s performance under this
project was highly unsatisfactory. IDA did not invest adequate resources upstream in the
careful preparation and execution of a carefully thought out program of sector studies,
before moving on to the project identification and preparation phases. The pressure to
slot it into the FY92 Board calendar, only to have it languish for 15 months before
becoming effective, is evidence of not having laid the fundamental groundwork for
project implementation, including a realistic assessment of GOG ownership of the
project. IDA should have insisted that the GOG adopt a clear PE sector development
policy and strengthen its implementation capacity before IDA embarked on supporting
the privatization program.
3.12 PATSEP's scope was overly ambitious and unrealistic given past experience of
the first phase of the divestiture program (during SAC I), initial implementation
experiences of SAC II, and the GOG’s unwieldy institutional infrastructure and limited
technical capacity to implement reforms. The institutional arrangements sought were
complex and demanding since the Project was to be implemented by two agencies which
had no distinctive advantages or proven expertise.
3.13 To minimize the impact of GOG’s weak commitment and deficient capacity, IDA
negotiated a lengthy set of conditionalities for credit effectiveness and a list of measures
to be taken. However, IDA should have carried out an assessment of the GOG’s earlier
performance in the initial phase of the divestiture program during SAC I. Repeated delays
in effectiveness might have been avoided. In order to try to address the implementation
capacity problem, the Project included a relatively heavy resident TA component, which
IDA subsequently restructured without adequate discussion with the borrower.
3.14 IDA procedures were not in place to ensure continuity and consistency of project
supervision from one Department/Division to another and from one task manager to
another.19 Staff turnover and poorly managed transitional arrangements for project
supervision led to inconsistencies in interpreting Project goals and assessing Borrower's
performance and to mixed messages that ultimately were detrimental to the success of the
project and IDA's relationship with the Government. The implementing agency’s
perception of IDA’s failure to maintain effective continuity in project supervision staff,
and changes in policies with respect to the hiring of long-term external consultants,
generated some difficulties in the relations with the implementing agency. The Borrower
disagreed with IDA’s decision to close the project.
Borrower Performance
3.15 This Review considers that the borrower’s performance under this project was
highly unsatisfactory compared to the ICR Review rating of unsatisfactory. The
19
The borrower’s ICR contribution (in French) was especially critical of this issue. That contribution is an extensive—
and occasionally almost bitter—presentation of what the authorities perceive to be the Bank’s shortcomings in
preparing and supervising the credit. The ICR contains no response to these criticisms.
11
performance of the GOG in fulfilling the conditionalities for Credit effectiveness was
unsatisfactory; the Bank had to delay credit effectiveness three times because of pending
actions on the part of GOG. Political interference in the management of PEs continued.20
Some of the divestitures were no more than accounting transactions; they accomplished
only a change in legal status without any real change in ownership, management
structure, or business ethos.
Institutional Development Impact
3.16 This Review agrees with the ICR Review judgment that the institutional
development impact was negligible. The institutional arrangement for divestitures
assumed that GOG officials would give carte blanche to an independent entity, the CP—a
majority of whose members were to be from the private sector and were to be charged
with executing the divestiture program. The CP was slow to be formed and membership
varied. The CP was occasionally not involved in privatization decisions and its ultimate
contribution to the process was minimal.
4. Financial Sector Adjustment Credit
Objectives
4.1 The Financial Sector Adjustment Credit (FSAC)—SDR 16.3 million, equivalent
to US$23 million—was approved in October 18, 1994 and closed in December 31, 1998,
after it was extended twice. FSAC had two components: (i) an adjustment credit of
US$18 million equivalent (disbursed in two equal tranches for eligible imports) and
(ii) a TA component of US$5 million equivalent, which includes refinancing of the
Project Preparation Facility of US$1.5 million equivalent. The project objectives were to:
• Further liberalize the financial market environment and strengthen the
monetary, regulatory, supervisory, and judicial environment;
• Restructure the financial sector and develop a bridge between the informal
and formal sectors to increase the reach of the financial sector; and
• Build upon the Central Bank’s human resource base and improve its capacity
to effectively supervise banks and enforce prudential norms.
4.2 Technical assistance was provided to the Central Bank (BCRG), the Ministry of
Economy and Finance (MEF), and the Ministry of Justice.
20
The region shares this view in its own assessment of the achievements of this Project. Government officials are of
the view that “their actions were motivated exclusively by the following two concerns: economic and financial
rationale and social welfare impact.”
12
Relevance
4.3 Project objectives were relevant. In the earlier SAC I and SAC II Credits, IDA
sought to provide general support to the GOG’s initial efforts in financial sector
liberalization policies. In this effort it was working in conjunction with the Fund
Program. However, there were a number of more sector-specific and commercial
banking issues which needed to be addressed. Commercial banks continued to be in a
precarious financial situation, reflecting the weak capacity of the BCRG to carry out
effective supervision and enforcement of prudential banking norms. There were also
specific capacity-building needs at the BCRG for which a more focused financial sector
operation would have been appropriate.
Implementation Experience
4.4 An initial financial sector loan preparation mission visited Guinea in April 1988,
followed by a preappraisal mission in September 1988. An Initial Executive Project
Summary (IEPS)was then distributed, foreseeing appraisal in December 1988. There was
no further processing of the proposed project until a financial sector review mission
visited Guinea in October-November 1992. Following the review of the initial draft of
the Financial Sector Study, a preappraisal mission for the project was carried out in April
1993. The Credit for US$23 million was negotiated in June 1994, approved by the Board
on October 18, 1994 and became effective on December 23, 1994. There were
unanticipated delays in the release of the second tranche, in part owing to the suspension
of the IMF program during 1995/6. With the scheduled closing date of March 31, 1997
approaching and still no release of the second tranche, the Region contemplated Credit
cancellation. However, on March 11, 1997, the Region advised the GOG that the Credit
closing date had been extended to December 31, 1998. On July 24, 1997, the second
tranche was released.
Outcome
4.5 This Review considers that the outcome of this project was moderately
unsatisfactory, compared to the ICR Review finding of unsatisfactory.
4.6 Financial market liberalization. The project promoted progress on the
liberalization of interest rates and foreign exchange markets and the introduction of other
instruments such as open market operations and reserve requirements.
4.7 Strengthen monetary, regulatory, supervisory, and judicial environment. The
framework for supervision of financial institutions was marginally strengthened; the tax
regime applied to financial operations was simplified; and some efforts were made to
improve and reinforce the judicial system. Some progress was also made in the legal and
regulatory framework and in BCRG supervision capabilities. The Research and Training
Center envisaged at the Central Bank was operational by the end of the project. Similarly,
training was provided at the Ministry of Justice in the implementation of legal reforms,
and at the Ministry of Finance on economic and financial analysis. However, the
effective application of the laws, supervisory norms and regulations requires further
13
commitment, effort, and support from the authorities to maintain and enhance BCRG’s
capacities in this area. Moreover, despite the efforts to improve the judicial system’s
capacity to enforce financial contracts, the lack of effective enforcement undermined
these efforts and did not create an adequately positive atmosphere for banking or
business.
4.8 Sector restructuring and institutional development. The financial position of
commercial banks remained difficult throughout the project. Of Guinea's seven
commercial banks, the Banque Internationale pour l’Afrique en Guinee (BIAG) was
liquidated and three out of the other six were recapitalized in 1998, at the time of project
closing. The GOG continues to be the principal owner of the largest bank, Banque
Internationale pour le Commerce et l’Industrie en Guinee (BICIGUI), with about
41 percent of the outstanding shares. Finally, additional efforts to further develop and
strengthen the sector—and bolster micro-finance institutions—were only partially
successful. Ultimately, the Credit Mutuel was liquidated, and an IDA loan to support
microfinance was cancelled.
Sustainability
4.9 The Review considers the sustainability of the project to be unlikely, compared to
the ICR Review rating of uncertain. As of December 2000, none of Guinea’s seven
commercial banks were in full compliance with all the Central Bank’s prudential ratios.21
Two of the banks which have been under restructuring plans since 1998 continue to
experience difficulty and need to be recapitalized again; however, because of their
relatively small size, they represent no systemic risk to the banking sector as a whole.
4.10 Project success required fundamental change in the structure of effective
incentives and sanctions for the monetary authorities and the banking institutions and
their management. This did not happen.
Bank Performance22
4.11 This Review concurs with the ICR Review rating of IDA performance as
unsatisfactory. In the process of preparing the project, a draft Financial Sector Study was
carried out. While the files indicate that this report was to be processed for printing, there
is no record of this actually having taken place. This represents a serious loss to the
intellectual basis for the operation, possible follow-up and IDA’s institutional memory.
4.12 IDA correctly identified that the financial sector deserved priority attention.
However, IDA should have put greater emphasis with the authorities on the need for a
rapid liquidation (rather than attenuated—and ultimately unsuccessful—restructuring) of
poorly performing financial institutions. Moreover, greater commitment from IDA was
21
IMF. 2002. Guinea: Request for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility—
Staff Report and Press Release on the Executive Board Discussion. Country Report No. 02/66. Washington, D.C.:
IMF.
22
More detail on this aspect of the project is presented in annex C.
14
needed to support the areas of microfinance and informal finance. IDA follow-up to the
activities supported under the Credit (e.g., a subsequent informal sector study or update)
could have helped reinforce the achievements under the project.
4.13 IDA has not followed up or built on the actions or accomplishments of the FSAC,
representing a lost opportunity for IDA to broaden and deepen financial sector reform.
Borrower Performance
4.14 The borrower’s performance under this project was unsatisfactory, compared to
the ICR Review rating of satisfactory. The authorities’ resistance to the
recommendations by IDA and the IMF that it promptly liquidate insolvent banks
prolonged the turmoil in the financial sector, and encouraged the persistence of poor
banking practices, while increasing the ultimate cost of the unavoidable
restructurings/liquidations. The BCRG was slow to move on the enforcement of
regulation and prudential supervision, although its technical capacities in this area appear
to have improved. The GOG was reluctant to disengage itself from participation in the
ownership of several banks, including the largest (BICIGUI). The financial health of
some of the savings and loans institutions remained poor and resulted in liquidation and
the cancellation of a microfinance operation. There were delays in fully utilizing some of
the training and TA opportunities available under the project.
Institutional Development Impact
4.15 This Review agrees with the ICR Review that the institutional development
impact of the project was negligible. The institution-building efforts in the Central
Bank’s capacity for prudential regulation and supervision fell short of the financial
sector’s needs and required reinforcement and stronger political commitment. In the
absence of independence from the political authorities, the Central Bank was impeded in
carrying out effective bank supervision and imposing appropriate sanctions on poorly
performing financial institutions. Some of the capacity-building initiatives by MEF and
the Ministry of Justice were useful. Nevertheless, despite the endeavor to develop the
judicial system in these areas with respect to financial sector development, the
Government did not demonstrate the capacity or political will to build on these efforts in
order to achieve significant progress in this area.
15
5. Third Structural Adjustment Credit
Objectives
5.1 The Third Structural Adjustment Credit (SAC III), for US$70 million equivalent,
was approved on December 16, 1997.23 The credit had two tranches; the first tranche of
US$45 million was released upon credit effectiveness on December 23, 1997; the second
tranche of US$25 million was disbursed on November 14, 1998. The AfDB cofinanced
the operation for the amount of US$13 million.
5.2 The objectives of SAC III were to:
• reorient public expenditures toward education, health, road maintenance, and
rural development, and specifically to non-wage recurrent expenditures in
those priority sectors;
• within these sectors, rationalize the respective roles of states, local
communities, and other providers of services, focus on non-wage recurrent
expenditures, and improve the efficiency of public expenditures;
• ensure the quality and volume of basic social services while maintaining
conditions amenable to a stable macroeconomic situation; and
• strengthen procedures for budget implementation, monitoring, and control
through a series of initiatives, most particularly the introduction of a
computerized expenditure monitoring system, ex-post audits of actual
spending, and simpler and more transparent budgetary procedures including
Government procurement.
5.3 The purpose of SAC III was to support a comprehensive policy package to
improve expenditure allocation, control, and monitoring and to help budget execution for
a lasting fiscal adjustment. The project had two main components. The first aimed at
restructuring non-wage recurrent expenditures toward four priority areas (education,
health, rural development, and road maintenance). These four sectors, which comprised
seven line ministries, were expected to adopt in fiscal year 1998 a medium-term
expenditure framework (MTEF). The second component of the project was designed to
strengthen budgetary execution and control through the adoption of a computerized
expenditure monitoring system, more rigorous implementation of the regulatory
framework especially for financial control and procurement, and the standardization and
simplification of budgetary processes.
Relevance
5.4 This operation was modestly relevant to IDA’s objectives. Public expenditure
management was a persistent and serious problem since the change of government in the
mid-1980s. However, operational relevance would have improved if the operation had
also focused on the long-standing issue of insufficient fiscal revenues, in order to achieve
23
This operation is also known as Public Expenditure Management Adjustment Credit or PEMAC.
16
a better balance between tax receipts and expenditures.24 In addition, the project was
focused only on non-wage recurrent expenditures in health, education, road maintenance,
and rural development. These expenditures represented less than 8 percent of GOG’s
total current expenditures in 1998.
Implementation Experience
5.5 Initiation of project preparation actually dates from August 1995, when a Project
Preparation Facility for US$700,000 (subsequently increased to US$1.73 million) was
approved. However, there was little actual progress in project preparation, as Guinea fell
out of compliance with its IMF program. Once the country was again found in
compliance with its IMF program, the SAC III preparation activities resumed.25
5.6 The SAC III and the Country Assistance Strategy were presented concurrently to
the Board in December 1997. The Credit became effective on December 23, 1997. The
second tranche was disbursed in November 1998 and the project closed in
December 23, 1998.
Outcome26
5.7 This Review agrees with the ICR Review that the outcome of the project was
unsatisfactory. There were significant divergences between project objectives and actual
achievements:
5.8 Reorientation of public expenditures toward priority sectors. The priority
character of the four sectors agreed to by the Government as crucial were not reflected in
actual spending. Actual spending on priority sectors declined from 43.2 percent of total
spending in 1997, to 39.5 percent in 1998. Concerning non-wage recurrent expenditures,
on which IDA put special emphasis, actual spending on non-wage recurrent expenditures
for the four priority sectors shrank from 31.5 percent in 1997 to 24 percent of the total
expenditures in 1998.
5.9 Intra-sectoral resource utilization in priority sectors. The effort to diminish the
size of wages relative to non-wage recurrent expenditures failed. For example, in 1998
only 69.3 percent of the amounts budgeted for the crucial area of operations and
maintenance were actually spent, while 104 percent of the amounts budgeted for the
wage component were actually disbursed in that year in the priority sectors. In the
education and rural development sectors, salaries and transfers continued to account for
24
Non-mining revenues have steadily increased and represent 9.7 percent of GDP in 2002 but total revenues, including
grants at 14.3 percent of GDP were below the average for the period 1991-01 of 24.2 percent for Africa as a whole,
18.8 percent for Cote d’Ivoire, 19.7 percent for Senegal, 20.6 percent for Mali, and 27.0 percent for Mauritania.
25
According to the GDF data base during the calendar years 1994–1996, when no SACs were disbursing, the Bank
disbursed an average of somewhat over US$56.3 million annually to the GOG.
26
Additional information on this aspect is contained in annex D, including the tables commented on here.
17
nearly all recurrent expenditures, leaving little scope for the necessary non-wage
recurrent expenditures targeted by this operation.27
5.10 Budget implementation and monitoring achievements. The implementation of a
computerized system for budget and expenditure management was delayed; the intended
expenditure controls did not materialize. A system for tracking the impact of the
measures on poverty was not introduced.
Sustainability
5.11 Owing to a lack of ownership of the reforms sought in SAC III, this Review
agrees with the ICR Review that sustainability is unlikely. In 1998 the authorities chose
to actually increase spending and reallocate spending in directions other than the agreed
SAC III priorities. Subsequently, again in 2001, the GOG shifted resources away from
non-wage recurrent expenditures in the priority sectors—despite further assurances to
IDA in the SAC IV of its intention to increase the share of its non-wage recurrent
expenditures in the priority sectors.
Bank Performance28
5.12 Both the ICR Review and this PPAR consider IDA performance as unsatisfactory.
IDA sought to draw on the lessons of the past shortfalls in its policy-based lending in
Guinea and to identify in this SAC III operation narrower indicators of borrower
performance. IDA based the operation on the findings of a Public Expenditure Review
which was never completed (see recommendation 7.1). However, IDA should not have
released the second tranche of the Credit based on only a partial year’s spending evidence
for 1998; rather it should have waited for at least a full year’s actual budgetary results in
order to have assured borrower compliance with the 1998 budgetary objectives of the
project. Gap-fill urgency led it to disburse the larger credit tranche up-front (US$45
million out of a total of US$70 million) and then to follow up with a second tranche
release, before examining the results of the1998 budget performance and before
demonstrated results in this spending reallocation process. As a result, an important
incentive for the GOG to restructure its inter- and intra-sectoral expenditures was lost.29
5.13 The volume of resources (US$70 million) provided under SAC III was large
relative to the modest amounts of non-wage recurrent expenditures in the priority sectors
addressed in this operation. IDA focused narrowly on expenditure issues, ignoring the
long-standing and continuing fundamental GOG problem of an imbalance between
inadequate fiscal revenues and an ambitious expenditure program. In addition to control
of expenditures, IDA should have addressed domestic fiscal resource mobilization.
27
Government comments on the PPAR refer to increases in allocation of non-wage recurrent expenditures for priority
sectors. “The allocated share to those sector went from 28 percent in 1997 to 30.89 percent in 1998 and to 31.5 percent
in 1999.”
28
Additional comments on this aspect of the project are presented in annex E.
29
According to the GDF data base, IDA disbursements in CY1997 to the GOG were more than twice the annual
average for either the preceding three years or the subsequent three years. The SAC III may have aggravated the
instability of donor assistance, rather than smooth out donor flows.
18
Generous budgetary support from IDA may have reduced the pressure on the GOG to
bring its total budgetary expenditures into a more sustainable pattern with likely domestic
fiscal resource mobilization prospects.
Borrower Performance
5.14 This Review agrees with the ICR Review that borrower performance was
unsatisfactory. The GOG failed to increase its actual budget execution rates in the four
priority sectors and, within these sectors, failed to achieve the targets with respect to the
share of non-wage recurrent expenditures. It failed to consistently maintain a stable
macroeconomic framework; the IMF program was suspended temporarily in 1999 and
2000.
Institutional Development Impact
5.15 This Review agrees with the ICR Review that the institutional development
achieved under this project was modest. The implementation of the MTEF was piloted in
four priority sectors, with little or only very limited success.
6. Fourth Structural Adjustment Credit
Objectives
6.1 The objectives of SAC IV were to initiate a medium-term reform program
designed to support GOG’s interim poverty reduction strategy. It was envisaged that the
SAC would be a prelude to Poverty Reduction Support Credits (PRSCs), once the
Poverty Reduction Support Strategy was completed. This SAC was intended to promote
economy-wide policy and institutional reforms by strengthening public expenditure
management and improving public sector governance as prerequisites for enhancing the
quality of public service delivery, especially to the poor. As in SAC III, attention was
focused on non-wage recurrent expenditures in priority sectors. The reforms supported
under the operation were intended to achieve the following objectives:
• More accountable and efficient use of public resources through improved
public expenditure analysis and management in:
(a) budget formulation;
(b) budget execution; and
(c) public expenditure auditing, monitoring, and reporting.
• More effective government through decentralization of decision-making and
service delivery by:
(a) increasing the share of non-wage recurrent budget resources allocated
to lower tiers of government to at least 80 percent of the total for
priority sectors;
19
(b) allocating funds directly to schools and health clinics in Conakry and
Kindia; and
(c) increasing the resource base of the local governments through fiscal
transfers and local revenue mobilization.
• Improved PE management and more efficient resource use through:
(a) the adoption of a comprehensive reform strategy for the PE sector;
(b) adoption of a program to mitigate the social cost of divestiture and
liquidation, together with a communication strategy;
(c) creation of a privatization unit;
(d) liquidation of eight insolvent enterprises; and
(e) updating of cross-debts and adoption of measures to settle arrears and
prevent their recurrence.
6.2 The operation was not tranched; the full US$50 million amount of the credit was
disbursed at project effectiveness.30 According to the PR, of the US$50 million
disbursed, the equivalent of US$10 million of the local currency equivalent generated by
the Credit was to be allocated for:
• Social safety net arrangements to minimize the social burden of the reform
program and more particularly the PE divestiture program, e.g., indemnization
of terminated PE workers (US$5 million);
• A household expenditure survey (US$3 million); and
• Contribution to a National Audit Fund to be created (US$2 million).
6.3 The PR conveyed the impression in paragraph 102 that these three activities to
which US$10 million was assigned would be closely monitored by IDA. However, there
was no formal mechanism to ensure that the commitments in the PR would be realized as
there was no mention of these components in the DCA.31
Relevance
6.4 The operation was modestly relevant to Guinea’s continued problems of fiscal
resource imbalance. It sought to address the issue of expenditures management but did
not assist in resolving the longstanding problem of inadequate tax revenue mobilization.
The main fiscal challenge identified in the macroeconomic framework underlying the
Poverty Reduction Strategy Paper was revenue mobilization. More revenues were seen
as essential to sustain domestic financing of policies to fight poverty and to reduce
30
This design permitted the Credit to be quickly processed and disbursed during a “window of opportunity” in which
the GOG was considered to be in reasonably satisfactory compliance with a Fund-supported program. The local
currency generated by the Credit was placed in an escrow account in the Central Bank, to be used for mutually agreed
activities, an arrangement not reflected in the DCA.
31
The region is of the view that “the fact that the DCA did not prescribe detailed monitoring arrangements should not
imply that they were less supervised than the other activities agreed under the credit.” However, OED found no
mention of these activities or the amounts spent on them in the ICR.
20
Guinea’s dependence on the external donor community.32 The accession of the country
to HIPC status showed that this dependence on external donors had become
unsustainable. Moreover, it is clear that the successive Bank structural adjustment credits
and other IDA disbursement provided a strong disincentive to bring total budgetary
expenditures into a more sustainable pattern with likely domestic fiscal resource
mobilization prospects.
6.5 Relevance was modest for other reasons as well. The SAC support and the
accompanying AfDB cofinancing, totaling US$58 million, represented about twice the
amount of the non-wage recurrent expenditures in the priority sectors which the GOG
actually implemented in 2001, the year in which these IDA funds were disbursed.33
Moreover, a single tranche operation of this design was inappropriate in the Guinean
context. The conditions focused on ex ante issuance of laws, decrees, planned budget
allocations, publishing new operating instructions, etc., rather than on the ex post
assessment of on-the-ground effective results of GOG actions.34 Given GOG’s track
record of performance, as evidenced by the unsatisfactory outcome of SAC III, a single
tranche operation with this conditionality was highly unlikely to achieve the project
objectives.
Implementation Experience
6.6 On November 10, 1999, the Region met to discuss a Project Concept Document
for a SAC IV operation. It was proposed to be a US$45 million Credit, to be disbursed in
four tranches, the first two tranches on fixed dates and the subsequent two tranches on
floating dates, in line with project conditionality. While a SAC IV preappraisal mission
was carried out in November 1999, no further preparatory work was carried out on
SAC IV until 2001, owing to problems in Guinea’s compliance with its IMF program for
more than one year.
6.7 Appraisal of the Fourth Structural Adjustment Credit (SAC IV) began on
April 4, 2001, followed quickly by negotiations (May 10, 2001). The Credit for
US$50 million was approved by the Board of Directors on July 24, 2001, and was
disbursed in a single tranche on August 31, 2001. Cofinancing of US$16 million was
provided by the AfDB. The Credit closed on June 30, 2002.
32
The region notes that there was an explicit division of labor whereby the IMF would handle fiscal issues, while the
Bank continued to deepen the budget and governance reforms introduced under SAC III” and that “as a Board
condition, the FY2001 budget law specified new rules for the allocation of locally collected community taxes.”
Interviews indicated that the IMF would have welcomed Bank assistance on this issue. Since SAC IV did not include
any baseline or targets for the locally collected taxes, progress on the ground could not be assessed.
33
According to the region “SAC IV permitted government financing of four months of teachers salaries, on an
exceptional basis.” However, the explicit focus of SAC IV was non wage recurrent expenditures. Teacher’s salaries
were not intended to be eligible expenditures according to the project’s original design.
34
Annex F contains a discussion on the conditionality for this single tranched Credit.
21
Outcome
6.8 This Review rates the Project’s outcome as unsatisfactory, rather than the ICR
Review rating of moderately satisfactory.
6.9 More accountable and efficient use of public resources through improved public
expenditure analysis and management. To improve budget formulation and execution, a
computer-based accounting and monitoring system was introduced, training was provided
and divergences between actual spending and budget allocations were to be monitored.
However, as in SAC III, efforts again focused on non-wage recurrent expenditures. The
DCA for SAC IV established that 35 percent of the total non-wage recurrent budget go to
the priority sectors. In 2001 the GOG actual non-wage recurrent expenditures in priority
sectors fell short of the DCA targets, reaching 10 percent of total current expenditures.35
The relatively low rate of actual non-wage recurrent expenditures in priority sectors
persisted in 2002, reaching only 25 percent of total current expenditures. With respect to
assigning a minimum of 46 percent of the overall budgetary allocation of the education
sector to primary education in the DCA, this assessment could not get the required data
during the OED mission to evaluate whether this condition was met.36 It was also not
available in the ICR. For non-wage recurrent expenditure, only 19 percent was actually
spent on primary and secondary education, indicating a substantial shortfall in the
achievement of this goal.
6.10 The audit fund and related procedures were established but actual implementation
was pending at the time of the OED mission to Conakry in February/March 2003, nearly
one year after the project closed and two years after the credit was disbursed. Thus,
progress was expected but not yet achieved in providing the basic documentation to
support the ex post verification of public procurement expenditures. It was intended that
qualified private auditors would identify cases of misappropriation and fraud and then
follow up on the application of sanctions. Out of a total of somewhat more than
900 eligible contracts implemented in the period 1999–2001, the authorities had chosen
to audit 270 contracts. According to the Terms of Reference for the proposed activity,
the chosen audit firm would be allowed 60 days to review and prepare a draft audit report
for these 270 contracts.37 Assuming a modest 5 days for drafting their report, the auditors
would have to review approximately five contracts per day in order to meet this deadline.
35
See annex F. The conditionality in the DCA was not as stated by the region: "35 percent of non-wage recurrent
expenditure relative to the total recurrent budget for those sectors." The condition in the DCA and the intent in the PR
was that 35 percent of total non-wage recurrent budget go to priority sectors. According to the 2001 budget law, the
total non-wage recurrent expenditure was 347 billion francs. The SAC IV DCA in 2001 required that the budget
allocate 35 percent of 347 billion francs or at least 121.45 billion francs to non-wage recurrent expenditure in the
priority sectors in 2001. According to the region and the Government, the budget allocation for non-wage expenditures
in the priority sectors in 2001 was about 70 billion francs which is well short of the DCA 35 percent requirement. The
objective of the loan was to increase the allocation of non-wage recurrent expenditures to priority sectors. If the DCA
condition as worded had been met, an extra 50 billion francs would have been allocated for non-wage recurrent
expenditures in the priority sectors. The misinterpretation of the condition led to a significant shortfall in allocations.
36
According to the region, in 2000 and 2001, the allocation reached 44 percent and 51 percent respectively.
37
The expected cost of this assignment is in the range US$1–1.3 million. A request for expressions of interest was
published only in the local press, in October 2002. On the basis of the response, eight firms were shortlisted. Proposals
were received in February 2003. The contract was to be signed in May 2003.
22
The auditors were not expected to be contracted before May 2003, thus their draft report
would only be available not less than two years after the Board approved the Credit.
6.11 With respect to ex-post financial control, reports of the audited accounts for the
1999 and 2000 budgets have been sent to the Chamber of Accounts for certification.
However, the reliability of the certification process is questionable because the Chamber
lacks core competencies, is not fully staffed, and lacks basic equipment.
6.12 The DCA cites as a condition of Credit effectiveness that the Government will
publicly announce and launch preparatory works for a comprehensive corruption survey.
38
This survey was not launched until mid-2003, nearly two years after credit
effectiveness although the ICR for this loan (December 2002) mentions that the
Governance and Corruption Survey has been implemented.
6.13 More effective government through deconcentration/decentralization of decision-
making and service delivery. The DCA required the adoption of rules governing the
allocation of resources between the Central Government and the decentralized
communities, increasing the share accruing to decentralized communities from
specialized taxes (cited in the DCA). The DCA did not specify the minimum level of
resources from the taxes to be provided to decentralized communities and the ICR did not
report on the actual amounts received by the communities. According to the region, taxes
repatriated to the communities increased from 0.69 percent of revenues in 2001 to 1.31
percent of total revenues in 2002.39 The DCA, the 2001 budget law, and associated
decrees cited therein included "assigning" increasing share of non-wage recurrent
expenditures to lower tiers of government. Over 80 percent of the non-wage recurrent
budget in the priority sectors is now allocated to the level of prefectures as per the
DCA.40 However, the intent of the credit in the PR was to “increase the share of non-
wage recurrent budget allotted to lower tiers of government,” meaning decentralized
communities (not just prefectures) because Prefectures are merely the local offices of the
national government under the Prefects appointed by the national government. The
credit's objective was to empower the communities; the PR stated that “the degree of
politicization is high and prefectures still hold significant powers . . . ”41 Further, the
institutional capacity and procedures which would guarantee an effective implementation
of these arrangements will need to be put in place to assure efficiency and accountability
in the operation of these newly decreed procedures. Timely and monitorable indicators
would also be required to assess potential improvements in the quality of service delivery
to the poor, an overarching goal of the Credit. Finally, while reliable effective local fiscal
38
The LDP paragraph reference cited in the DCA does not coincide with the LDP in the PR provided to the Executive
Directors at the time of Credit approval.
39
According to the region, “It is important to recognize the measure of progress this represents. Francophone Africa
has little history of local government and no experience of transferring funds to the sub national level…. Guinea is one
of the few Francophone African countries to be piloting the direct transfer of the entire operating budget to the
school/clinic level, with a view to improving the quality of services through local control . . . ”
40
As non-wage recurrent expenditures in the priority sectors are projected to represent about 10 percent of total GOG
current expenditures, this suggests about 8 percent of total current expenditures have been
deconcentrated/decentralized.
41
According to the region, in 2002 budgets were being transferred directly to schools and primary health care centers in
four regions of the country on a pilot basis.
23
revenue mobilization systems remain a key issue in overcoming the dependency
relationship of the local areas on the Central Government, information on local revenue
mobilization and budgetary performance was not available. A system to effectively
collect and report this information from various levels of government in a timely manner
was yet to be implemented.
6.14 Improved public enterprise management and more efficient resource use through
divestiture. An institutional, legal, and regulatory framework for the PE sector was
adopted (a privatization law was promulgated), a new privatization unit (PU) was created,
the Direction Nationale du Portefeuille (DNP) was given sole responsibility for the
management and valuation of the PEs, including their debt burden. A social fund was
established for re-training or re-employing employees affected by privatization.
Liquidation of eight enterprises could not be completed under the timeframe of the credit
because of delays in valuation and establishment of divestiture strategies. Seven of the
eight small enterprises slated for privatization/liquidation were liquidated by end-2002.
However, a complete inventory of cross-debt between government and PEs was not
produced and progress is yet to be made in the restructuring of public utilities.42
Sustainability
6.15 This assessment rates sustainability as unlikely, rather than the ICR Review rating
of not evaluable. The actual non-wage recurrent expenditures in the priority sectors
(which fell considerably short of agreed targets) are unlikely to be maintained because
Government commitment to priority sectors has been weak and it has not yet addressed
the challenge of increasing domestic revenues. At end January 2003, the authorities were
not on track with their macro economic program (see para 1.4) and IMF’s PRGF program
was terminated. Not even an IMF Staff Monitored Program would be in place in 2003.
The sustainability rating is also affected by possible changes in the political environment
and the lack of an obvious successor to the President.43
Bank Performance
6.16 This Review rates IDA’s performance as unsatisfactory, compared to the ICR
Review rating of satisfactory.
6.17 Given GOG’s track record on previous adjustment credits and its inability to
adhere to previous, similar conditionality, a relatively large (US$50 million) single
tranche operation with relatively weak conditionality was not an appropriate operation in
42
The Government is of the view that “ . . . prior to 1986, Guinea had never had any experience with privatization.
From the institutional, technical, and human resource standpoints, as well as in terms of its legislative and regulatory
framework, the country was unprepared for this exercise . . . Despite this handicap considerable progress was achieved
. . . the result being a higher quality of service provision and greater competitiveness.”
43
According to the region, “sustainability has to be viewed in the context of recent history. Fifty percent or more of the
budget slippage in the period 2000-2003 is attributable to unscheduled defense and humanitarian expenditures imposed
on Guinea by the regime in Liberia and also by the spill–over from civil war in Sierra Leone and the civil unrest in
Cote d’Ivoire. These factors were beyond the control of Guinea and, given limited revenues, pushed Guinea inexorably
out of the IMF program.”
24
the Guinean situation. As an example of stronger conditionality, the Bank should have
included in the DCA, liquidation of the eight enterprises and the completion of inventory
of cross-debt between the government and the enterprises. Instead, in the DCA the
authorities’ only commitment with respect to public enterprise reform was “disseminating
information to the public.” As was the case with the processing of the earlier SAC III, a
“pressing” need for balance-of-payments support played a major role in the timing and
design of a quick disbursing loan to the GOG.44 GOG performance was highly uneven
under its Fund-supported program; the Region sought to exploit the “windows of
opportunity” provided by intermittent compliance to present an operation to the Board.45
6.18 Disbursement should have been conditioned on actual performance in the priority
sectors for 2001 and 2002. GOG’s actual expenditures on non-wage recurrent items in
the priority sectors during the GOG 2001 and 2002 fiscal years totaled less than the
US$66 million budgetary support provided by SAC IV and by the AfDB cofinancing.
SAC IV repeated the same pattern with similar conditionality under SAC III. A multi-
tranche operation over a longer time frame with monitorable indicators and sufficient
time to assess compliance would also have allowed IDA to monitor the completion of
priority activities related to the poverty-focused household budget survey, PE reform, and
the audit of government procurement contracts, all financed by the credit.
6.19 Fiscal revenue mobilization problem was widely recognized in the donor
community, and highlighted in the Poverty Reduction Strategy Paper. Nevertheless, IDA
pursued an approach which emphasized expenditures. In fact through its relatively
generous quick-disbursing credits, IDA provided disincentives for the GOG to improve
its fiscal revenue mobilization performance. The lack of progress on poverty reduction
and growth contributed to an unsustainable debt burden.
6.20 Although the PR made specific statements about the usage of US$10 million of
local currency equivalent funds (see paras. 6.2–6.3), IDA did not report on these
activities in the ICR.46 The PR conveys the impression that appropriate instruments were
in place to ensure that funds were expended in a manner consistent with the objectives set
out in the operation. Steps should have been taken in the DCA to include time-bound,
monitorable and objectively verifiable indicators of performance with respect to the three
activities in para 6.2. OED’s review mission to Guinea observed that substantial sums
are being dedicated to the procurement of goods and services for these activities but there
are inadequate fiduciary standards for these expenditures. In the Guinean governance
environment, fiduciary standards with respect to the use of these funds would be
44
However, it should be pointed out that the external resource flow to the GOG continued. Even during the external
resource “hiatus” between SAC III and SAC IV disbursements, IDA disbursed US$29 million annually to the GOG,
while other multilateral donors disbursed almost US$48 million p.a.
45
The region disagrees with this assessment. Regional staff are of the view that they “sought to build on good
dialogue-with the Bank and between Government and the people-and on the commitment to improve the management
of public expenditures in the priority sectors . . .The decision to opt for a single trance recognized both Government’s
strong commitment to keeping the economy on track and its maintaining the flow of resources to the
priority sectors . . . ”
46
The region states that it “has continued to monitor priority activities related to the household survey, the social fund
and the comprehensive corruption survey, as well as progress overall in public expenditure management and
governance through the 2003 Public Expenditure Review and Fiduciary Assessment (PER-FA) . . . ”
25
appropriate. Finally, IDA should have exercised its right to audit the deposit account in
dollars at the Central Bank for both SAC III and SAC IV especially in view of press
reports of irregularities in the Central Bank.47
6.21 The documentation of this loan submitted to the Board was deficient. The DCA
cites a Letter of Development Policy (LDP) dated June 14, 2001 whereas the LDP in the
PR distributed to the Executive Directors was dated April 2001. The June LDP is the
French version of the April LDP and was not distributed to the Executive Directors.
Although it does not differ in substance from the English version, differing paragraph
numbering in the two versions results in incorrect references in the DCA.
Borrower Performance
6.22 This Review rates the borrowers’ performance as unsatisfactory, compared to the
rating in the ICR Review of satisfactory. The GOG has failed to maintain a stable
macroeconomic environment.48 The approach of presidential elections later this year
may further imperil the delicate fiscal situation. Considerable efforts are still needed to
prepare local governmental entities to manage and account for the fiscal resources to be
put at their disposition, and in order to reinforce the independence of the decision-making
at the local level.49 However, there has not been established a clear time frame for this to
be completed. GOG failed to liquidate the eight enterprises before project closing, when
only a presidential decree was needed to proceed.
Institutional Development Impact
6.23 This Review rates the institutional development impact of the SAC IV as modest,
rather than the ICR Review rating of substantial.50 Non-wage recurrent expenditure
management sought to build on the outcomes of SAC III but allocation and actual
expenditure of non-wage recurrent budgetary resources to priority sectors have fallen
short of targets, performance monitoring remains weak, and performance with respect to
PE reform fell short of the objectives of SAC IV. The SAC IV facilitated the
deconcentration/decentralization of the budget which made possible the transfer of
resources to local levels and to bring decision makers closer to the beneficiaries.
However, the deconcentration/decentralization process has yet to reach the level of
decentralized communities and to demonstrate its benefits.
47
According to the region, “The DCA does give us the option of auditing the accounts. The time is not ripe for
exercising the option since the activities are still underway. . . The Bank had—at appraisal and in the interim—
assurances about the operations of the Central Bank, as provided by the IMF’s Safeguard Assessment (July 2002).”
Interviews in Guinea showed continuing concerns about operations of the Central Bank.
48
According to the region, “The PER-FA documents the measures Guinea is taking to address the revenue problem and
get the program back on track, notably: reform of the tax regime, with performance-linked incentives for collection;
reduction of the number and type of exemptions to import duties; inter sector transfers from defense and foreign affairs
to the priority sectors and continued fine tuning of the efficiency of spending in these sectors.”
49
The region notes that the development of local decision-making is complemented by the Village Services and the
Capacity Building operations.
50
The region argues that “the impact is substantial in terms of public expenditures and management and the related
area of governance: budget systems now permit targeting . . . and there are effective controls, including the tracking of
expenditures at the local level. . . . ”
26
7. Key Lessons Learned
7.1 Undertake a Solid Economic and Sector Work (ESW) Program. A well-conceived
and carefully executed program of economic work is essential to underpin policy lending
operations. During the period under review the only economic report issued was the 1990
CEM. Both the financial sector and the public expenditure reviews remained in draft
stage and are not generally accessible.
7.2 Focus Policy Reform on a Few Key Areas with Monitorable Performance
Indicators. While numerous aspects of economic management need improvement,
capacity limitations require a focus on the most important areas where there is
demonstrated commitment from the authorities and a capacity to deliver. Rather than
citing assertions of good intentions, tranche release conditions should focus on actual
performance outcomes, as assessed by readily available, time-bound, monitorable, and
objectively verifiable performance indicators.
7.3 In the Presence of Persistent Fiscal Deficits, Address both Fiscal Revenue
Mobilization as well as Expenditure Procedure Issues.
7.4 Underpin Civil Service Reform Efforts with Upstream Work. It would have been
useful to have had the civil service reforms underpinned by analytical work and a clearer
agreement with and commitment from the highest level of the government on the goals,
and the likely outcomes of civil service reform.
7.5 Reserve Single Tranche Credits Only for Governments with an Established Track
Record of Good Policy Reform Performance. Given the experience with one-tranche
operations, the region should carefully assess how a series of one-tranche PRSCs can be
structured to ensure that key objectives are achieved and to manage the risk, given the
existing governance situation in Guinea.
7.6 Ensure Proper Identification of Resource Gap. Resource gaps can be exaggerated
to get the attention of external donors and to serve to mobilize additional external
resources. IDA should carefully ascertain that the "resource gaps" are based on a realistic
assessment of ownership and effective implementation capacity.
7.7 Ensure Continuity of IDA Staff. Management should plan for and manage rotation
and turnover in a manner which is not disruptive to IDA’s operations and client relations.
7.8 Forewarn of Unsustainable IDA Risk Exposure. In the period encompassed by
this Review, IDA substantially increased its portfolio exposure in Guinea, shifting from
being one of the smaller external creditors to the principal official external creditor. The
consequence was a major increase in IDA’s risk exposure, a phenomenon which was not
adequately assessed and communicated to IDA Management and the Board in a timely
manner. Despite its rising exposure as an official external creditor, IDA did not give
sufficient consideration to the likely sustainable external debt burden for the country. It
also did not discuss the implications of sending to the Board relatively large lending
operations that were increasing the debt burden. IDA did not identify or formulate the
27
“trigger” for an “exit” or the orderly reduction in its risk exposure. This culminated in the
country requiring access to HIPC debt relief. Procedures for orderly reduction of IDA
risk exposure deserve more careful attention. An adequate assessment of
creditworthiness of the country in the face of a rising and likely unsustainable debt
burden could have provided the analytical underpinning for properly providing loan loss
reserves for IDA's expanding Guinean portfolio.
Annex A: Macroeconomic Indicators, 1987–2002
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Real Per Capita GDP
1995 US $ 506 522 527 534 523 524 531 550 560 572 585 598 605 603 607 n.a.
Growth (% p.a.) 0.4 3.3 1.0 1.4 -2.0 0.0 1.5 3.6 1.8 2.0 2.3 2.2 1.3 -0.3 0.7 n.a.
CPI (annual average) (%) 36.7 27.4 28.3 19.4 19.6 16.6 7.1 4.2 5.6 3.0 1.9 5.1 4.6 6.8 5.4 3.0
Government revenues as a % of GDP 14.9 14.4 15.5 15.8 14.7 13.5 11.6 10.4 11.0 10.1 11.2 11.2 10.9 11.1 11.3 12.1
Government Expenditures as % of GDP 22.5 24.4 24.2 24.6 22.9 21.3 19.1 17.5 17.6 16.2 17.1 14.8 16.4 16.6 18.8 20.3
Overall budget balance (commitment
basis) as a % of GDP:
Including grants -3.8 -6.8 -5.0 -5.2 -4.6 -3.5 -3.8 -3.6 -2.7 -3.0 -2.9 -0.7 -3.0 -3.2 -4.1 -5.9
Excluding grants -7.6 -10.0 -8.7 -8.8 -8.2 -7.8 -7.5 -7.1 -6.6 -6.1 -5.9 -3.6 -5.4 -5.6 -7.5 -8.2
External current account balance (% of
GDP):
Including official transfers and grants -4.5 -9.2 -4.9 -5.5 -4.6 -7.8 -7.0 -4.2 -4.5 -4.4 -3.1 -2.6 -4.2 -2.9 -2.4 -6.1
Excluding official transfers and
grants -8.4 -12.7 -8.9 -9.1 -8.3 -12.3 -10.7 -7.8 -8.5 -7.3 -6.3 -6.0 -7.2 -6.5 -3.8 -7.5
IDA Disbursements (US$ million p.a.) 39.3 47.8 63.6 51.8 82.9 87.9 133.6 63.1 58.9 47.0 109.0 66.2 29.0 29.0 70.5 32.5
Donor Grants, excluding technical
cooperation (US$ million) 65.7 65.5 130.1 93.5 154.3 221.5 166.0 162.2 235.2 149.5 124.9 172.5 158.4 111.6
Public and Public Guaranteed Long-term
Debt Disbursed and Outstanding (PPG)
(US$ million) 1,894.1 2,041.6 1,967.8 2,252.8 2,399.2 2,450.2 2,659.2 2,886.4 2,987.1 2,980.6 3,008.7 3,126.4 3,061.0 2,940.4
Gross National Income (GNI, US$
million) 2,055.7 2,253.2 2,262.0 2,665.4 2,849.0 3,143.8 3,195.7 3,361.3 3,607.6 3,772.9 3,659.8 3,460.1 3,349.7 2,931.4
PPG/GNI 0.9 0.9 0.9 0.8 0.8 0.8 0.8 0.9 0.8 0.8 0.8 0.9 0.9 1.0
Sources: GDP data are from the WDI database. CPI data are from a series of IMF reports, as are the budget and external balance figures. Data on IDA annual
disbursements are from the GDF data base, plus data for CY2001 and CY2002 from the Bank Controller's data base. Data on Donor grants, PPG debt outstanding
and GNI are from the GDF data base. Additional data for 2000–2002 are from EIU and IMF estimates. Many of the numbers for 2002 are preliminary or
estimates.
31 Annex B
IDA Performance in SAC II
1. The multiple goals of SAC II represented too broad a dispersion of the (already
recognized and widely cited) limited implementation capacity of the Guinean
authorities.51 The program supported by SAC II was overly ambitious in its design, as it
encompassed almost all elements of economic management. It should have been reduced
to fewer (but not necessarily more modest) time-bound, monitorable objectives in
domestic fiscal resource mobilization and government financial management, which were
both urgent areas of concern given the forecasted decline in aluminum mining revenue.
These should have been clearly linked to tranche release. Other objectives whose
meaningful accomplishment would have required a longer time frame, e.g., civil service
rationalization, or support of privatization of PEs, could have been addressed in either
subsequent policy lending operations, or in more focused sectoral operations. By
narrowing the focus of the SAC II operation on a set of key interrelated issues, the risk of
weak local implementation capacity would have been mitigated and the potential for
better project execution enhanced.
2. Haste in processing this follow-on SAC impeded incorporating the lessons
learned from the initial policy-support operation. In the rush to cover projected
immediate severe external resource shortages (“gap-fill”). IDA moved forward with a
SAC II operation without having invested the necessary resources in a carefully
conceived and executed program of economic reports on which to anchor this second
policy-based lending operation.52 Also, during FY88–90, IDA provided substantial
additional credits (the Private Sector Promotion SECAL) which the SAC II ICR suggests
eased the pressure on public finances and may, therefore, have contributed to the failure
in the implementation of SAC II reforms.
3. In view of the observable discrepancies between the Government's rhetoric and
actions toward reforms during the SAC I period, a key issue in the preparation of SAC II
should have been obtaining firm commitment from the Government to the reform
process, accompanied by a time-bound, monitorable and objectively verifiable program
of actions. However, risks to SAC II program implementation were only identified as:
(i) a decline in the international aluminum price which would have a negative impact on
the projected improvement of Guinea's external and fiscal balances; and (ii) the weak
ability of the administration to execute the program effectively in a timely manner.53
Given the Region’s experience under SAC I, there should have been an explicit
discussion of the possible weakening of GOG commitment to specific points of the SAC
II program, e.g., civil service reform, PE reform, etc., and the appropriate IDA responses
in each such case.
51
Conditionalities were wide-ranging, addressing the domestic prices of cement and rice, Central Government
organization, civil service testing and personnel reduction, accounting and budgetary practices, establishing a corporate
taxpayer role, and reform of public enterprises.
52
Tranche release conditions which are couched in terms of outcomes or results, rather than the mere promulgation of
legal measures, can serve as important aids to track borrower performance and support effective project management.
53
The contemporaneous PAGEN II Economic Management Technical Assistance Project (Credit 1963-GUI) was
intended to assist in ameliorating such implementation capacity problems. Measures to ameliorate or offset the impact
of commodity price fluctuations were not addressed.
Annex B (continued) 32
4. The delays in SAC II effectiveness and in second tranche release point to
continued serious problems with the use of the SAC instrument to achieve significant
development impact.54 Signs of a weakening commitment to pursue forcefully the SAC I
adjustment program became evident throughout 1987. The GOG’s (delayed) compliance
with the conditions which permitted the release of the SAC I second tranche in early
1988 was taken as a sign of renewed commitment and led to what in hindsight turned out
to be a too optimistic assessment by IDA of the progress which could be achieved under
SAC II. A serious financing gap of US$80 million was projected for 1988 and 1989; the
urgency of “gap-fill” financing to preserve past gains and macroeconomic stability also
contributed to insufficient attention being given during the preparation of SAC II to the
strength of Government commitment to the reform program. Rather than repeatedly
delaying the SAC II closing date from December 1990 to (ultimately) December 1993, in
order to permit disbursing the second tranche three years late, the Region should have
considered canceling the SAC II Credit, including the undisbursed second tranche.
54
The credit disbursed over five-and-a-half years instead of the expected 18 months as conditions for effectiveness and
for second tranche release met with significant delays .However, in one respect the slow pace of disbursement and
delayed closing of the Credit owed to the Bank’s reluctance to contravene the IMF’s actions as to the failure of the
GOG to comply with the Fund’s ESAF during part of this period.
33 Annex C
IDA Performance under the Financial Sector Adjustment Credit
1. The importance of a sound and efficient financial sector was recognized starting
in the 1980s. In the first phase of the reforms of the mid-80s, the GOG liquidated the
state banks and the National Insurance Company. In the next several years, six privately
owned banks appeared to provide financial services. Three of those banks were fully
privately–owned (two of which had French participation and one had Saudi
participation), while the GOG participated in the capital of the other three. However,
while the state banking system was liquidated, the legal and institutional framework for a
sound banking system had not been prepared. Overall, the non-performing loans of the
commercial banks represented 31 percent of their portfolio. Commercial bank operating
costs were high, and they tended to provide a relatively limited set of financial
intermediation services to a geographically confined area. The high priority assigned to
the financial sector was appropriate.
2. Among the problems identified in IDA’s preparation activities, the need to
restructure two privately-owned banks received a priority attention from IDA staff, even
before the Credit was approved. These two commercial banks-the Banque Internationale
pour l'Afrique en Guinee (BIAG) and the Banque Islamique de Guinee (BIG)-had been
established when the GOG dissolved the state banking system in the first phase of its
liberalization program in the mid-80’s. IDA was in close communication with the IMF
on the problems of these two institutions, and the IMF held the view that both banks
should be liquidated-which the authorities vigorously opposed. As an intermediate
solution, the IMF and IDA sought to identify a recapitalization plan which would commit
the current private owners of the two banks and minimize the budgetary implications of
the GOG’s involvement in their bail-out.
3. Although IDA had not yet appraised the proposed project, IDA staff appear to
have been involved in trying to resolve the issues with respect to these two commercial
banks, participating in the discussions between the GOG and the private owners and
apparently serving as a principal channel of communications for the respective proposals.
For example, on June 9, 1993, an IDA staff member met in Geneva with representatives
of the foreign investors of one of the externally-owned banks needing recapitalization.
No GOG representatives are recorded in the respective Aide Memoire as attending that
meeting, at which the foreign investors agreed to certain bank restructuring terms. In the
files there are no terms of reference or back-to-office report relating to this IDA
mission.55 About ten days after the meeting in Geneva, IDA advises the GOG authorities
(June 22, 1993), that IDA “has learned” of an agreement between the GOG and the
foreign investors on the matter of the BIG restructuring.
4. With respect to the BIAG, after failing to come to an agreement with the foreign
shareholders with respect to a recapitalization plan, the Central Bank named an
interventor for that institution in August 1993, to manage it. One of the minority foreign
55
One learns of the meeting only because of the apparent inadvertent inclusion of that aide-memoire in the project
files.
Annex C (continued) 34
shareholders complained to the Regional Vice President of IDA’s “veto” to the
shareholder’s proposal for the BIAG restructuring, causing financial prejudice to that
shareholder. The other foreign shareholder withdrew its participation in the restructuring
effort.
5. The veto proved to be costly. According to the ICR of the FSAL, when the
BIAG’s liquidation was completed in December 1998, it cost the GOG about
US$10 million. This is considerably higher than the cost of the private investor’s 1993
proposal (US$5.5 million) which the IDA staff had “vetoed,” i.e., recommended to the
GOG that it not accept at that time. The Country Team proposed to increase the SAC III
by US$5 million (to US$70 million) in order to cover the costs of the BIAG liquidation.56
6. IDA did not follow up on initial activities in the financial sector. Following
IDA’s withdrawal from the sector, and the subsequent cancellation of the microfinance
operation, the burden of strengthening the policy framework and institutional
underpinning of the financial sector has fallen to the Fund.
56
It was stipulated that the SAC III would not contain any financial sector conditionality.
35 Annex D
GOG Budgetary Performance in Priority Sectors under SAC III
1. Rather than apply the MTEF to the entire GOG budget in the context of the
proposed project, in SAC III five priority sectors were initially chosen: agriculture,
education, energy, health, and roads. The list was subsequently narrowed to health,
education, road maintenance, and rural development. The project was limited to focusing
on non-wage recurrent expenditures in these sectors, which represented less than
8 percent of the GOG’s current expenditures in 1998.
Budget Allocations and Actual Budget Execution for Non-Wage Recurrent Expenditures:
FY1997–99 (percent)
1997 1998 1999
Sectors Allocated Actual Allocated Actual Allocated Actual*
Rural Development 1.0 0.5 1.4 0.8 0.9 0.4
Public Health 3.4 2.9 3.6 2.1 3.8 3.4
Education 17.0 20.0 19.1 16.0 18.8 21.4
Road Maintenance 6.3 8.0 6.9 5.2 8.0 7.1
Priority Sectors 27.6 31.5 30.9 24.0 31.5 32.3
Billion Guinean Francs (23.6) (29.5) (45.3)
(GNF)
Other 72.4 68.5 70.1 76.0 68.5 67.7
Total 100 100 100 100 100 100
*Execution for GOG FY1999 is estimated on the basis of actual January-September expenditures.
Source: ICR.
2. Applying the IMF-reported Guinean Franc/US$ exchange rates for 1997 (1,145)
and 1998 (1,298) to the figures in the above table, total actual non-wage recurrent
expenditures for these priority sectors were US$20.1 million and US$22.7 million,
respectively. If the 1999 budgetary allocations for these priority sectors had been
realized, the total would have been about US$26 million. This is remarkably poor
performance for a project for which IDA disbursed US$70 million between the end of
CY1997 and CY1998.57 It clearly seems that the GOG had pressing priorities elsewhere
and did not share IDA’s views with respect to priorities for increasing non-wage
recurrent expenditures in these four sectors. The overall increase for non-wage recurrent
expenditures in these priority sectors represents a small share of the resources provided to
the GOG by IDA in SAC III, and a very low return on IDA’s “investment” in policy
reform.
3. With respect to improving Intra-Sectoral Resource Utilization in Priority Sectors,
the government increased the amount of non-wage recurrent expenditures to the four
priority sectors to 30 billion Guinean Franc (GNF) in 1998 from about 23.6 billion GNF
in 1997.58 Thus the share of non-wage recurrent expenditures amounted to 25 percent in
1998 compared to 22.3 percent in 1997. The share reached 32.2 percent for the first nine
months of 1999.
57
The AfDB provided cofinancing of US$13 million for SAC III.
58
Table 3 of the ICR.
Annex D (continued) 36
As we see in the table below, based on the ICR, the budgetary execution rate for non-
wage recurrent expenditures remained low in 1998, with only 30 billion GNF (69.3
percent of the allocated 38.7 billion GNF) for operations and maintenance in 1998
compared to 90.2 billion GNF (104.3 percent of the allocated 86.5 billion GNF) for the
wage component.59
Planned and Actual Expenditures in the Priority Sectors, 1997–98
1997 1998
Item GNF billion % GNF billion %
Priority Sectors’ Allocation 115.4 125.5
Wages 84.4 73.1 86.5 68.9
Non-wage recurrent allocations 30.6 26.9 38.7 31.1
Priority Sectors’ Expenditures 105.8 120.2
Wages 82.2 78.1 90.2 75.0
Non-wage recurrent expenditures
23.6 21.9 30.0 25.0
Sources: ICR tables 1, 2, and 3.
59
The 69.3 percent execution rate in 1998 for non-wage recurrent expenditures actually represented a decline from the
77.1 percent execution rate for 1997.
37 Annex E
IDA Performance in SAC III: The Need for Careful Design and
Enforcement of Project Conditionality
1. It is common for policy-based lending operations to include some provisions for
studies to be carried out or action plans to be implemented on terms "acceptable to the
Association," as being conditions of effectiveness or tranche release of that operation.
Often there may be considerable resources allocated to finance the activities in question.
In SAC III there are two such items specified in Schedule 2 of the DCA as conditions of
second tranche release:
"4. The Borrower has submitted to the Association a reorganization plan
for MAEF (Ministry of Agriculture, Water and Forestry) acceptable to the
Association."
and
"5. The Borrower has submitted to the Association an action plan,
including a timetable acceptable to the Association for the purposes of
establishing a financially autonomous Road Agency with functions and an
operational framework satisfactory to the Association, to ensure a timely
availability of funding required to settle all recurrent expenditures incurred
for road routine [sic] maintenance activities."
2. According to the ICR of December 16, 1999, the first SAC III condition above
was complied with before the second tranche release in November 1998. However, the
Ministry of Agriculture reported to the OED mission that only the first phase of the
required study was carried out, while the second phase of the study, which was intended
to actually design and guide the implementation of the personnel staffing processes in the
MAEF and which was the raison d'etre for initiating the study, has not been carried out,
more than four years after the second tranche release.
3. With respect to the second tranche release condition cited above of establishing a
financially autonomous Road Agency, during the past four years since the release of that
tranche the Agency has only been funded through annual allocations from the GOG
budget and donations from the European Union (EU). It is hoped that during the second
quarter of 2003, the Agency will have access to a part of the proceeds of the GOG tax on
petroleum products for part of its budget. By the end of the decade there also may be in
place a system for collecting tolls from road users. However, it appears unlikely that in
the next several years it will be possible to wean the Road Agency away from heavy
dependence on continued EU donations if anything approaching an adequate program of
road maintenance is to be carried out.
Annex E (continued) 38
4. In both of these cases it appears that IDA staff may have prematurely declared
tranche release conditions “satisfied” in order to disburse funds, thus undercutting
achieving the policy reform objectives sought by the SAC III operation.
39 Annex F
SAC IV Credit Effectiveness and Tranche Release Conditions
1. Borrower performance should be assessed on the basis of readily available, time-bound,
monitorable and objectively verifiable performance indicators. It is important to point out that
the use of the word “progress” —even if modified by adjectives such as “substantial, ”
“significant, ” “adequate,” or “appropriate”—does not, per se, constitute an objectively
verifiable, time-bound and monitorable measure of project achievements. In the case of SAC IV,
the conditions of Credit effectiveness and single tranche release are set out in Schedule 2 of the
DCA. These conditions are presented and assessed in the following paragraphs. On the basis of
this discussion, we suggest that the various conditions of effectiveness reviewed below do not
appear to be of such substance as to have warranted the disbursement up front in a single tranche
of US$50 million to a regime with a very uneven record of policy reform.
2. Allocations in the GOG FY2001 budget:
"(i) A minimum of 35 percent of the total non-wage recurrent budget to the
priority sectors, namely education, health, social affairs, justice, and road
maintenance; and (ii) a minimum of 46 percent of the overall budgetary allocation
of the education sector to primary education."
3. Information on the fulfillment of these two conditions was gathered in Guinea for this
assessment mission, as the ICR did not provide this information. The findings are presented in
annex table 1, at the end of this section. With respect to the first condition, in 2000, the GOG
actually spent about 26 percent of non-wage recurrent expenditures in the designated priority
sectors. In 2001 the GOG fell extraordinarily short of meeting the stated SAC IV goal of
35 percent; less than 10 percent of 2001 non-wage recurrent expenditures were in the priority
sectors. Since the SAC IV was not presented to the IDA Board of Directors until the end of June
2001, the Region should have taken greater care and diligence to assure that actual expenditures
in this category were on track in order to reasonably attain the goal set out in the DCA as a
condition of effectiveness. Even in 2002, the GOG managed to allocate to priority sector non-
wage recurrent expenditures only 25 percent of the total for this spending category — again
considerably below the 35 percent goal of SAC IV.
4. With respect to the second condition, that of assigning “a minimum of 46 percent of the
overall budgetary allocation of the education sector to primary education,” no data to assess the
actual outcome in this regard was available. For non-wage recurrent expenditure, only
19 percent was actually spent in primary and secondary education. This suggests a similar
substantial shortfall from project goals. It is worth noting that the total volume of non-wage
recurrent spending in the priority sectors on which IDA was focusing its attention in SAC IV
represented only between 6 percent and 14 percent of total current expenditures of the GOG in
these three years 2000–02.60
60
The shares were similar during the SAC III operation.
Annex F (continued) 40
5. Medium-Term Expenditure Framework:
"adopted a medium-term revenue and expenditure framework satisfactory to the
Association.”
6. It would be useful to have further detail set out on the time frame over which IDA would
be assessing the medium-term revenue and expenditure framework and the criteria by which the
framework would be assessed as "satisfactory.” These criteria should include specific
consideration of the impact of the framework on time-bound, monitorable, and objectively
verifiable indicators of progress in poverty alleviation. Unfortunately, the use of a single tranche
up front disbursement vitiates using this approach to assess borrower performance.
7. System of Quarterly Budgetary Reviews:
"Instituted a cabinet level quarterly review system to insure budget
implementation consistent with agreed budgetary allocations for the priority
sectors and wide publication of key results, as described in paragraph 22 of the
LDP."
8. This review system may have formally existed at the time the Credit was declared
effective, but it clearly never became an effective tool for accomplishing this stated mission with
respect to actually budgetary spending, as we saw above. Moreover, the LDP paragraph
reference in the DCA does not coincide with the LDP in the PR provided to the Executive
Directors at the time of Credit approval.
9. Review of Draft Loi de Reglement:
"submitted to the competent chamber of its Supreme Court for its review of the
draft Loi de reglement for FY1998."
10. It could be useful to establish a time frame for this review to be completed and the
appropriate follow-up to take place.
11. Budgetary Allocation to Prefectures:
"under its FY2001 Budget Law, allocated to its Prefectures a minimum of 80
percent of the resources appropriated under said Budget Law to the priority
sectors."
12. While the condition is set out in terms of budgetary allocations and appropriations, it
would have been useful for the ICR to have reported on the actual spending results with respect
to these budget items in 2001. In view of the shortfalls in budgetary performance for the priority
sectors, actual achievements with respect to this condition may be doubtful.
13. Resources Provided to Decentralized Communities:
"adopted under its FY2001 Budget Law, new rules governing the allocation of
resources between the Central Government and the decentralized communities,
41 Annex F (continued)
increasing the share accruing to said decentralized communities with respect to
the IMDL; CFU; TPU and TUV."
14. It would have been useful to specify in the DCA at least some minimum levels of
resources from the cited taxes to be provided to the decentralized communities under the
proposed arrangements. In this manner, actual performance of the GOG with respect to this
condition could have been monitored and assessed. Moreover, it would have been useful for the
ICR to report on the actual 2001 amounts with respect to these taxes which were provided to the
decentralized communities, the amounts they actually spent in 2001 and the priority areas in
which these 2001 expenditures took place. It appears that the MEF has difficulty in producing
reliable figures of the actual amounts of funds involved in this intended reallocation of funds to
the local government administrations.
15. Issuance of Circular on Budget Decentralization and Administration:
"issued Circulaire No. 321 MEF/CAB dated May 8, 2001 on budget
decentralization and administration of delegated credits, setting forth specific
rules designed to strengthen financial management and control of all procurement
operations concerning goods, works, and services procured under Central
Government contracts for the benefit of decentralized communities and to
ascertain that the obtained items are effectively used for the purposes for which
they were procured."
16. It appears that there were some delays in the "operationalization" of these arrangements.
The ceilings with respect to the contract approval authority of Governors and Prefects were
established in May 2002. In November 2002, the responsible persons for procurement at the
Governorate level were named.
17. Ex Post Procurement Audits:
"issued Arrete N0. 22625-MEF-CAB-01 on ex-post procurement audits, dated
June 25, 2001, establishing: (a) ex-post audits of government contracts, and
(b) defining procedures and sanctions mechanisms concerning the implementation
of said contracts."
18. It is expected that the audits in question, covering about 270 contracts (out of a total of
about 900 contracts) awarded in the period 1999–01, may begin in May 2003, almost two years
after the Board approved the Credit and the US$50 million were disbursed. It would have been
informative for the ICR to have assessed the time frame for actual implementation of project
goals.
19. Corruption Survey:
"publicly announced and launched preparatory works for a comprehensive survey
by the CNLC [Comite National de Lutte contre la Corruption et de la
Moralisation des Activites Economiques et Financieres] of representatives of
government, civil society and businesses, designed to identify key corruption-
Annex F (continued) 42
related problems and set priorities for governance reform, as described in
paragraph 46 of the LDP."
20. While this paragraph might be interpreted to suggest that the preparation for carrying out
this survey were well-advanced at the time of Credit effectiveness, progress on the ground has
been much slower. The consultants to carry out the survey may be contracted in the second
quarter of CY2003, almost two years after loan effectiveness. The LDP paragraph reference in
the DCA does not coincide with the LDP in the PR provided to the Executive Directors at the
time of Credit approval.
21. Communication Strategy for Budget Allocations and Public Enterprise Sector Reform:
"adopted the communications strategy described to in [sic] paragraph 34 of the
LDP for the purpose of disseminating information to the public with respect to the
following: (i) detailed budget allocations figures pursuant to the Loi de finance
2001 for each decentralized community with respect to the priority sectors
referred to in paragraph A.1 of this schedule [F.4.a above]; and (ii) the PE sector
reform program, including its social action plan to minimize the social impact of
the reforms."
22. Adopting a communications strategy or publicity campaign with respect to these two
matters may not have been very difficult to comply with. However, it should be pointed out that
the above LDP paragraph cited above in the DCA does not coincide with the LDP distributed to
the Board in the PR at the time of Credit approval.
23. Overall, the various conditions of effectiveness reviewed above do not appear to be of
such substance as to have warranted the disbursement up front in a single tranche of
US$50 million to a regime with a very uneven record of sustained policy reform.
Annex Table 1: Actual GOG Expenditures in Priority Sectors, 2000–2002 (,000 Guinean Francs)
2000 2001 2002
% in % in % in
Priority Grand Total Priority Priority Grand Total Priority Priority Grand Total Priority
Item Sectors all Sectors Sectors Sectors all Sectors Sectors Sectors all Sectors Sectors
Actual Non-wage Recurrent
53,629,581 208,000,000 25.8% 36,719,349 380,000,000 9.7% 108,477,735 433,900,000 25.0%
Expenditures
Budgeted Non-wage Recurrent
55,266,244 196,057,100 28.2% 112,194,400 347,008,000 32.3% 116,026,140 377,246,699 30.8%
Expenditures
Total Actual Current Expenditures 504,000,000 684,700,000 776,100,000
Actual Non-wage Recurrent
Expenditures in Priority Sectors as 10.6% 5.4% 14.0%
a % of Total Current Expenditures
Sources: Actual non-wage recurrent expenditures are from the ICR for 2000 and 2001, and provided by the MEF for 2002. Budget figures are from the respective Loi de
Finance. Total current expenditures are from EUI for 2000 and the IMF for 2001 and 2002. (The 2002 figure is the Fund's SMP estimate, as of early 2003.)
45 Annex G
Individuals Contacted/Interviewed
Guinea
Ministry of Economy and Finance
El Hadj Amadou Sow, Secretary General
Roger Patrick Milimono, Assistant to the Minister
Mme. Aboukhalil Mado, Directrice Nationale du Tresor et de la Comptabilite Publique
Ousmane Bah, Directeur National, Direction National de Controle Financier
M. Diallo, Directeur National, Direction National de Statistics
Dr. Moumini Diallo, Chef du Service Informatique
Dr. Ahmed Tidjane Souare, Inspecteur General des Finance
Nourdine Balde, Coordinateur, Fonds d'Audit des Marches Publics (UGFA), Inspection
Generale des Finances
Fode Oussou Diane, Directeur National Adjoint, Direction National des Marches Publics
Toure Mamadi, Chef, Division Adjudication et Contrôle, Direction National des
Marches Publics
Ansoumane Conde, Directeur National, Direction National de la Dette et des
Investissements Publics
Gouidri Mustapha, Advisor, Direction National de la Dette et des Investissements
Publics
Billy Guilavogui, Chef Division Tertiaire, Direction National de la Dette et des
Investissements Publics
Mamady Nabe, Chef Section Sante et Affaires Sociaux, Direction National de la Dette et
des Investissements Publics
Saa Mathos Lelano, DBEF, Direction National de la Dette et des Investissements
Publics
Ansoumane Conde, Direction National de la Dette et des Investissements Publics
Aboubacar Conde, Direction National de la Dette et des Investissements Publics
Mr. Cisse, Direction Nationale de Portefeuille
El Hadj Ibrahima Balde, Directeur National Adjoint, Direction Nationale des Impots
Ibrahima Camara, Coordonnateur, Unite de Privatisation
Abraham Boure, Charge d'operation, Unite de Privatisation
Mamady Toure, Assistant DNDIP, Unite de Privatisation
Ismael Diakate, Conposante Sociale, Unite de Privatisation
Sekou Kande, Conposante Social,Unite de Privatisation
Mamady Camara, Charge d'operation, Unite de Privatisation
Ibrahima Sory Sano, Responsible Administratif, Unite de Privatisation
Abdourahame Charles Diallo, Assistant Responsible Admin. Fin., Unite de
Privatisation
Ibrahima Naby Toure, Unite de Privatisation
Annex H (continued) 46
Ministere de l'Agriculture
Fassou Elie Damey, Secretaire General
Abdoulaye Cherif Sylla, C/CAB
Abdoul Salam Toure, DC/BLEPA
Ramatoulaye Barry, DAAF
Monkamy Camara, Chef Conpable
Abdoul Rahim Bah, Conpable
Ministere des Travaux Publics et des Transports
Sekou Ping-Pong Conde, Directeur Administratif et Financier, Fonds Routier
Dr. Ahmadou Gueye, Direction Nationmale de l'Entretien Routier
Ministere de la Justice
Ibrahima Lassidy Toure, Chef, Division des Aqffaires Administratives et Financieres
Amadou Sakho, Directeur, Centre de Formation et de Documentation Judiciares
Traore Mamadouba, Chef, Section Finance Comptabilite
PSRP Team
Alpha Ousmane Diallo, Advisor to the Minister MEF
Mamadou Bobo
BCRG
Cheick Sylla, Directeur Monnaie et Credit
Mr. Berete
United Nations Development Program
K. O. Amaning, Resident Representative
Adama Toe, Deputy Resident Representative
Diallo Aissatou Bah, Economist
European Union
Malado Kaba, Economist/Project Officer
47 Annex G (continued)
Embassy of Japan
Yoshitaka Tomita, Ambassador
Yoshiaki Ito, Ministre-Conseiller
Embassy of Canada
Philippe Beaulne, Ambassador
Carlos Laviades, Conseiller et Consul
USAID
Robert Boncy, Deputy Mission Director
Patricia Rainey, Strategic Results Coordinator
Mohammed Falfana
Kenda Diallo
Banque Internationale pour le Commerce et l'Industrie de la Guinee
Bernard Deleuze, Administrateur Directeur General and President Association de
Banquiers
Alain Lamarlere, Directeur General Adjoint
Private Citizen
Youssouf Sylla, Former Project Manager, PATSEP
World Bank Staff/Consultants Contacted/Interviewed
Sherri Archondo, AFTPS
Demba Ba, AFTPS
Jean-Claude Balcet, LCSER
Hassane Cisse, LEGAF
Ezzedine Larbi, AFTP4
Kevin Lumbila, AFTP4
Pierre Morin, AFTPS
T. Mpoy-Kamulayi, LEGAF
Brian Ngo, AFRCE
Issa Sanogo, AFMGN
Hiroaki Suzuki, EASUR
Jan Weetjens, AFMGN
49
Annex Table 2: IDA Reports, 1966–02
Report
Report Title Date Document Type
No.
Country Assistance Strategy Progress CAS Progress
Report 2001/07/02 22451 Report
A Socioeconomic Assessment of Well-
being and Poverty 1997/03/31 16465 Sector Report
Beyond Poverty: How Supply Factors
Influence Girls’ Education in Guinea 1996/03/29 14488 Sector Report
Plan National d’Action Pour Environmental
l’Environnement, Vol. 1 and 2 1994/09/30 E80 Action Plan
Household Energy Strategy 1994/01/31 ESM163 ESMAP Paper
Issues and Options in the Energy Sector 1986/11/30 6137 Sector Report
Source: World Bank ImageBank Documents and Reports Web Site.
51 Annex H
Basic Data Sheets
GUINEA: SECOND STRUCTURAL ADJUSTMENT CREDIT (CREDIT 1926-GUI)
Key Project Data (amounts in US$ million)
Appraisal Actual or current Actual as % of
estimate estimate appraisal estimate
Total project costs 65.1 65.1 100
Credit amount 65.1 65.1 100
Cumulative Estimated and Actual Disbursements
FY89 FY90 FY91 FY92 FY93 FY94
Appraisal Estimate 29.0 65.0 65.0 65.0 65.0 65.0
(US$M)
Actual (US$M) 22.3 27.3 27.3 27.3 56.4 63.7
Actual as a % of Estimate
Project Dates
Original Actual
Identification 2/18/1987
Appraisal 3/1998
Negotiations 5/13/1988
Board Presentation 6/16/1988
Signing 6/29/1988
Effectiveness 3/2/1989
Project Completion
Credit Closing 12/31/1990 12/31/1993
Staff Input (weeks)
Actual
Preparation to Appraisal 38.2
Appraisal 4.5
Negotiation through Board Approval 26.9
Supervision 117.6
Completion 16.3
Total 203.5
Source: ICR.
Annex H (continued) 52
Other Project Data
Borrower/Executing Agency: Ministry of Finance
Follow-on Operations
Amount
Operation Credit No. Board Date
(US$ million)
Public Enterprise Sector Rationalization
and Privatization Technical Assistance Cr. 2398 8.13 6/23/1992
53 Annex H (continued)
Basic Data Sheet
GUINEA: PUBLIC ENTERPRISE SECTOR RATIONALIZATION AND PRIVATIZATION
TECHNICAL ASSISTANCE CREDIT (CREDIT 2398-GUI)
Key Project Data (amounts in US$ million)
Appraisal Actual or current Actual as % of
estimate estimate appraisal estimate
Total project costs 8.13 Not available
Credit amount 7.13 3.96 56
Cumulative Estimated and Actual Disbursements
FY93 FY94 FY95 FY96
Appraisal Estimate (US$M) 3.84 6.56 7.30 7.30
Actual (US$M) 0 1.17 3.96 3.96
Actual as a % of Estimate 0 18
Project Dates
Original Actual
Identification 2/1991
Appraisal 3/1992 3/1992
Negotiations 5/1992 5/1992
Board Presentation 6/1992 6/23/1992
Signing 7/6/1992 7/6/1992
Effectiveness 9/1992 9/15/1993
Project Completion 12/31/1995 12/31/1995
Credit Closing 12/31/1995 12/31/1995
Staff Input
Actual
Weeks US$
Preparation to Appraisal 37.5 79.4
Appraisal
Negotiation through Board Approval 18.9 40.0
Supervision 49.1 104.0
Completion 10.5 22.2
Total 116 245.6
Source: ICR.
Annex H (continued) 54
Other Project Data
Borrower/Executing Agency: Ministry of Finance
Follow-on Operations
Amount
Operation Credit No. Board Date
(US$ million)
Financial Sector Adjustment Credit Cr. 2653 23.0 10/18/1994
55 Annex H (continued)
Basic Data Sheet
GUINEA: FINANCIAL SECTOR ADJUSTMENT CREDIT (CREDIT 2653-GUI)
Key Project Data (amounts in US$ million)
Appraisal Actual or Actual as % of
estimate current estimate appraisal estimate
Total project costs 23.0 23.0
Credit amount 23.0 23.0 100
Co-financing
Date physical components
completed
Cumulative Estimated and Actual Disbursements
FY95 FY96 FY97 FY98 FY99
Appraisal Estimate (US$M) 7.3 14.6 16.3
Actual (US$M) 6.78 7.73 8.11 15.16 16.08
Actual as a % of Estimate 93
Project Dates
Original Actual
Identification 10/1992
Appraisal 4/1994
Negotiations 6/1994
Board Presentation 10/18/1994
Signing
Effectiveness 12/23/1994
Project Completion 3/31/1997 12/31/1998
Credit Closing 3/31/1997 12/31/1998
Staff Input (weeks)
Planned Actual
Preparation to Appraisal 74
Appraisal
Negotiation through Board 61
Approval
Supervision 68 124
Completion 9.7 6
Total 265
Source: ICR
Annex H (continued) 56
Other Project Data
Borrower/Executing Agency: Ministry of Finance
Follow-on Operations
Amount
Operation Credit No. Board Date
(US$ million)
Third Structural Adjustment Credit Cr. 3021 70.0 12/16/1977
57 Annex H (continued)
Basic Data Sheet
GUINEA: THIRD STRUCTURAL ADJUSTMENT CREDIT (PEMAC) (CREDIT 3021-GUI)
Key Project Data (amounts in US$ million)
Appraisal Actual or current Actual as % of
estimate estimate appraisal estimate
Total project costs 70.0 70.0 100
Credit amount 70.0 70.0 100
Co-financing 13.0 13.0 100
Cumulative Estimated and Actual Disbursements
FY98 FY99
Appraisal Estimate (US$M) 45.0 70.0
Actual (US$M) 45.0 70.0
Actual as a % of Estimate 100 100
Project Dates
Original Actual
Identification 11/1996 11/1996
Appraisal 9/18/1997 9/18/1997
Negotiations 11/3/1997 11/3/1997
Board Presentation 12/16/199 12/16/1977
Signing 12/16/1997 12/16/1997
Effectiveness 12/23/1997 12/23/1997
Project Completion 12/31/1998 12/31/1998
Credit Closing 12/23/1998 12/23/1998
Staff Input
Actual
Weeks US$
Preparation to Appraisal 34.9 144.6
Appraisal 30.8 100.9
Negotiation through Board Approval 3.7 4.0
Supervision 35.6 99.8
Completion
Total 105.0 349.3
Source: ICR
Annex H (continued) 58
Other Project Data
Borrower/Executing Agency: Ministry of Finance
Follow-on Operations
Amount
Operation Credit No. Board Date
US$ million
Fourth Structural Adjustment Credit Cr. 3551 50.0 6/24/2001
59 Annex H (continued)
Basic Data Sheet
GUINEA: FOURTH STRUCTURAL ADJUSTMENT CREDIT (CREDIT 3551-GUI)
Key Project Data (amounts in US$ million)
Appraisal Actual or Actual as % of
estimate current estimate appraisal estimate
Total project costs 50.0 50.0 100
Credit amount 50.0 50.0 100
Co-financing 16.0 16.0 100
Cumulative Estimated and Actual Disbursements
FY02
Appraisal Estimate (US$M) 50.0
Actual (US$M) 50.0
Actual as a % of Estimate 100
Project dates
Original Actual
Appraisal 4/2001
Negotiations 5/2001
Board Presentation 6/2001
Signing 7/24/2001
Effectiveness 7/2001 8/9/2001
Project Completion 7/2002 6/30/2002
Credit Closing 7/2002 6/30/2002
Staff Input
Actual
Weeks US$
Preparation to Appraisal 45 154.4
Appraisal
Negotiation through Board Approval 12 43.8
Supervision 7 21.9
Completion N/A N/A
Total 65 220.1
Source: ICR
Annex H (continued) 60
Other Project Data
Borrower/Executing Agency: Ministry of Finance
Follow-on Operations
None
61 Annex I
Comments Received from the Government
Annex I (continued) 62
63 Annex I (continued)
Annex I (continued) 64
65 Annex I (continued)
Annex I (continued) 66
67 Annex I (continued)
Annex I (continued) 68
69 Annex I (continued)
Annex I (continued) 70
71 Annex I (continued)
73 Annex I (continued)
Comments Received from the Government
(English Translation of French Letter)
REPUBLIC OF GUINEA
Work – Justice – Solidarity
_______
Conakry, September 12, 2003
MINISTRY OF ECONOMY AND FINANCE
Office of the Minister
o
N 3152/MEF/CAB
To: Ms. Alice C. Galenson
Acting Division Chief
Operations Evaluation Department
Washington
c/o The Resident Representative
World Bank Resident Mission
Conakry, Guinea
Dear Madame,
This is to acknowledge receipt of your letter dated August 7, 2003, which was
accompanied by the draft retrospective evaluation report covering the following projects:
- Second Structural Adjustment Credit (SAC II);
- Public Enterprise Sector Rationalization and Privatization Technical Assistance
Project (PATSEP);
- Financial Sector Adjustment Credit;
- Third Structural Adjustment Credit (SAC III); and
- Fourth Structural Adjustment Credit (SAC IV).
For your part, please take note of the following comments that we have concerning this
report:
A. General comments: The report contains assertions that are offensive and, in
some cases, unwarranted.
1. On page iv, paragraph 2, the evaluator states that “.... The donor
community is concerned about poor governance and corruption”; and on
page 5, paragraph 2.8, referring to the reform of public enterprises, that
“the transparency of some of the arrangements was questionable”.
Annex I (continued) 74
These assertions are unacceptable unless they are backed up with concrete
proof.
2. On page 5, paragraph 2.10, the comment is made that Guinea is
characterized by “an overstaffed, inefficient civil service (characterized by
widespread corruption).” Although corruption is indeed a troublesome
issue currently facing the Government, it would be an exaggeration to
claim that the Administration is riddled with corruption to the point where
it might be called a characteristic of Guinea.
3. On page 21, paragraph 6.12, referring to the anti-corruption campaign, the
report emphasizes that “…measures will be needed to insulate these
various transparency initiatives from continuing political pressures.”
It should be pointed out here that the anti-corruption efforts currently
underway in Guinea are being made on the Government’s own initiative.
In a signed letter addressed by the President of the Republic to the
President of the World Bank, the latter’s support is sought for sustained
action against corruption. The creation of the National Commission to
Combat Corruption (Comité national de lutte contre la corruption et de la
moralisation des activités économiques et financières, CNLC) and the
implementation of the aforementioned campaign are motivated by the
same political will on the part of the Government.
4. On page 7, paragraph 2.15, it is gratuitously claimed that “Within the
Government of Guinea itself there were multiple views on the desirability
of the reform program”. Although opinions did sometimes diverge, the
divergences were assuredly not about the advisability of a reform
program. They instead had to do with the modalities for implementing
such a program.
5. On page 10, paragraph 3.15, concerning the Borrower’s performance
under the PATSEP, it is stated that: “Political interference in the
management of [public enterprises] continued.” In reality, the
Government’s actions were motivated exclusively by the following two
concerns: economic and financial rationality and social welfare impact.
6. On page 23, paragraph 6.22, the report asserts that “…Questions remain
as to the real political independence of decision-making at lower levels.”
As true as it may be that “considerable efforts are needed to prepare these
local governmental entities to manage and account for the fiscal resources
to be put at their disposition,” it is equally absurd to connect budget
management with any kind of political dependency, since the State budget
as well as those of local communities are subject to clearly established
laws and regulations.
2
75 Annex I (continued)
Overall, the author of this report casts Guinea in a negative light, and his conclusion –
namely that the country should no longer be eligible for single-tranche credits—is aimed
at changing the excellent relationship between the World Bank and Guinea.
B. Comments of a technical nature
1. On page 3, paragraph 1.5, the report notes that “the Guinean economy has
performed poorly” and that the period in question “was characterized by
slow growth in per capita GDP.”
Concerning the country’s macroeconomic situation, the report fails to give
due credit to the efforts put forth by the Government with the support of
its partners, and to the results obtained. Guinea is one of only a few
countries to have experienced real GDP growth of about 4 percent
throughout the 1990s. Over this period, annual per capita GDP growth
averaged 1.6 percent, as compared to 1.2 percent for the least developed
countries (LDCs) taken as a group, and –0.1 percent for Sub-Saharan
Africa. (Source: UNDP Human Development Report, 2003, p. 281).
It is true that we had hoped for stronger growth and that we were in
constant need of external funds to finance development and maintain the
balance of payments. All of this needs to be considered within the context
specific to Guinea. When the Second Republic came into being in 1984,
all of the basic infrastructure (roads, water, energy, etc.) needed to be
developed, to say nothing of the efforts required to develop basic social
services that were then in crisis (e.g., the gross primary enrollment ratio
was about 24 percent, compared to 74 percent in 2003; the infant mortality
rate, estimated at 98 per thousand in 1999, stood at 136 per thousand in
1992.) It should be emphasized that most of the external financing granted
to Guinea is devoted to investment.
Moreover, the country’s macroeconomic and financial performance would
have merited a more positive rating if the report had taken into account the
state of affairs in the subregion, which has been plagued since 1989 by
serious armed conflict that has driven hundreds of thousands of refugees
and displaced persons into Guinean territory.
2. Page 5, paragraph 2.10: The report deems the sustainability of SAC II
“unlikely.” Although some problems persist, it must be acknowledged that
noticeable progress has been made in all the areas targeted by the project
(e.g., streamlining of the civil service, improvement of revenue
mobilization, enhanced financial management, continued reform of public
enterprises, modification of the legal and institutional framework to
encourage private sector development, and the development of a general
social policy.)
3
Annex I (continued) 76
Regarding civil service reform, Guinea reduced the number of civil
servants from about 100,000 in 1986 to fewer than 55,000 in 1993, when
the SAC II closed, a reduction of about 45 percent. Since then, staff
numbers have remained essentially unchanged, and most new recruitment
has been for priority sectors (e.g., primary and secondary teachers, health
care professionals, etc.) Indeed, it is for this very reason that several of
the Administration’s technical departments are now hard hit by the aging-
out of personnel and staff retirements.
As far as boosting revenues is concerned, the continued decline in mining
revenues, which is attributable to exogenous factors, is one of the
constraints being encountered. Non-mining revenues have risen steadily
and represented 9.7 percent of GDP as of 2002, as against 4 percent in the
mid-1980s.
As for public enterprise reform, it is important to be aware that, prior to
1986, Guinea had never had any experience with privatization. From the
institutional, technical and human resource standpoints, as well as in terms
of its legislative and regulatory framework, the country was unprepared
for this exercise. The delays in implementing the reforms, as well as
certain pitfalls encountered subsequently, are essentially attributable to
that fact. Despite this handicap, considerable progress has been achieved.
In several sectors, such as mining, banking and insurance, the portfolios of
public enterprises have been virtually transformed, the result being a
higher quality of service provision and greater competitiveness.
3. On page 9, paragraph 3.10, the evaluator asserts that “Management of the
public enterprises was assigned to the DNMPPE which had no
specialized competence in that area.”
The DNMPE has never been in charge of managing public enterprises.
Rather, it monitors them on behalf of the Government.
4. Page 15, paragraph 5.4 (Relevance of SAC III):
We agree that the improvement of budgetary resource mobilization
remains a constant concern, despite the efforts already deployed and the
results obtained (e.g., while non-mining revenues constituted one fourth of
total revenues and about 4 percent of GDP in the mid-1980s, these figures
had been boosted to 81 percent and 9.7 percent, respectively, as of 2002;
and this is without counting the revenues of communities, or social
security contributions to the National Social Security Fund).
The relatively low level of total revenues has a great deal to do with the
continued decline in the mining sector’s contribution, which is a result of
4
77 Annex I (continued)
worldwide price trends for mining products. The challenge of revenue
mobilization must be met; and in order to do this, the dynamic that has
already been set in motion must be pursued and strengthened.
At the same time, improved expenditure management is an imperative for
Guinea, as is raising the population’s standard of living. We do not feel
that we should wait for revenues to reach the desired levels before
embarking upon the reforms needed to justify expenditures. Moreover, it
is no coincidence that the budget restructuring objectives are confined to
non-salary expenditures. As the Public Expenditure Review of 1996
indicated, priority sectors were suffering more from a shortage of non-
salary operating funds.
5. Page 16, paragraph 5.8 (Outcome of SAC III/Reorienting of public
expenditures toward priority sectors):
Contrary to what is stated in the evaluation report, the proportion of total
expenditures devoted to priority sectors increased between 1997 and 1998.
The share of non-salary operating expenditures (Titles III and IV)
allocated to those sectors went from 28 percent in 1997, to 30.89 percent
in 1998 and to 31.5 percent in 1999. Priority sectors’ share of investment
expenditures out of the national development budget (NDB) went from 44
percent, to 62 percent, and then to 65 percent, respectively, over the same
period. The proportion of foreign investment going to priority sectors was
82 percent in 1999, as against 56 percent in 1997.
6. Page 16, paragraph 5.11 (Sustainability of SAC III):
As the preceding figures attest, resources have been allocated in
accordance with priorities defined by the Government and agreed upon
with the World Bank. Resource allocation during the SAC IV
implementation period was carried out in the same spirit.
7. On page 20, paragraph 6.9 (Outcome of SAC IV), the report states that, in
2001, the sums actually spent on priority sectors represented 10 percent of
total current expenditures, instead of the targeted 35 percent. These
figures are not an accurate reflection of the efforts made on behalf of the
priority sectors.
Indeed, under Titles III and IV, 38.4 percent of the budget was allocated to
priority sectors in 2001, and 43.3 percent in 2002, for respective totals of
GNF 71.6 billion and 119.3 billion (in 2000, the priority sectors received
an allocation of GNF 59.3 billion, or 36.1 percent of the total). Actual
disbursements out of these allocations totaled GNF 54 billion in 2001
5
Annex I (continued) 78
(prior to the catch-up program61) and GNF 111.6 billion in 2002; these
figures correspond to execution ratios of 55 percent and 93.5 percent,
respectively.
8. Page 24, paragraph 6.23 (Institutional development impact of SAC IV):
One of the major reforms carried out under SAC IV is the
deconcentratation/decentralization of the budget. The measures taken
have made it possible, among other things:
- to transfer a considerable volume of resources to local-level
services (e.g., schools, health posts, etc.);
- to restore to communities a greater share of locally-collected taxes
and levies (see table 4, attached);
- to bring the locus of decision-making closer to beneficiaries
(through public procurement at the local level) and
- to assign greater responsibility to the population for the monitoring
of expenditures (particularly with the publication of information on
funds transfers and their intended use)62.
This reform constitutes the backdrop for the entire dynamic that is driving
implementation of the poverty reduction strategy. It reflects the fervent
wishes expressed by local populations during the process of formulating
the strategy.
In terms of improved quality of public resource management, as well as
role-modeling and the enhanced capacities of grassroots services, the
reform’s impact remains considerable. And, since the progress achieved
under the reform is now seen by those at the grassroots level as an
accomplished fact, any backsliding would now be impossible.
Further to the preceding remarks, please find attached four tables detailing:
- allocation and execution of non-salary recurrent expenditures in priority sectors
(2000–02);
- expenditure allocation and execution in priority sectors at the subnational level
(2001–02);
61
By the end of 2001, the execution of expenditures in the priority sectors was very weak. In order to remedy this, in agreement with
the Bank, the Government put in place an extended expenditure catch-up program through the end of March 2002. By that deadline,
in parallel to the execution of the 2002 budget, the credits for 2001 were 98 percent executed.
62
Until 2000, the management of public funds, including public procurement, was handled entirely by central departments. No
responsibility was at that time delegated to the deconcentrated departments, and no instrument of control was available to them. In
addition, credits allocated for operations were not broken down in any way between the central departments and those at the
regionalized level. In practice, very few resources were actually mobilized for the deconcentrated departments.
6
79 Annex I (continued)
- the proportion represented by deconcentrated departments in the allocation and
execution of expenditures in the priority sectors; and
- the share of taxes and levies restored to local communities.
Respectfully yours,
(signing for the Minister)
[seal and signature]
El Hadj Amadou SOW
Secretary General
cc: Mr. Paulo Fernando Gomes, Executive Director for the Republic of Guinea
Mr. Mamadou Dia, Operations Director for Guinea
Mr. Jan Aime E. Weetjens, Resident Representative
Mr. Nils Fostvedt, Acting Director, Operations Evaluation Department
7
Annex I (continued) 80
Table 1: Allocation and Execution of Non-salary Recurrent Expenditures in
Priority Sectors (2000–02), in GNF million
2000 2001 2002
Alloc. Execution Alloc. Execution Alloc. Execution
% % %
Education
Title III 17,052 15,876 93.10 25,464 13,270 52.11 32,689 31,871 97.50
Title IV 13,679 13,376 97.78 11,323 11,175 98.69 17,834 17,100 95.88
Total 30,731 29,252 95.19 36,787 24,445 66.45 50,523 48,971 96.93
Health
Title III 3,808 3,587 94.20 6,319 4,846 76.69 19,894 18,835 94.68
Title IV 3,543 2,836 80.05 5,362 4,290 80.01 16,421 12,153 74.01
Total 7,351 6,423 87.38 11,681 9,136 78.21 36,315 30,988 85.33
Rural Dev.
Title III 1,462 1,340 91.66 3,220 1,454 45.16 12,095 11,979 99.04
Title IV 236 210 88.98 657 535 81.43 702 657 93.59
Total 1,698 1,550 91.28 3,877 1,989 51.30 12,797 12,636 98.74
Roads fund
Title III 13,350 13,039 97.67 14,015 4,840 34.53 13,896 13,500 97.15
Title IV 80 0 0.00 86 0 0.00 0 0
Total 13,430 13,039 97.09 14,101 4,840 34.32 13,896 13,500 97.15
Urban Dev. & Housing
Title III 202 75 37.13 249 144 57.83 304 300 98.68
Title IV 0 0 0 0 0
Total 202 75 37.13 249 144 57.83 304 300 98.68
Social Welfare
Title III 925 626 67.68 961 586 60.98 1,105 1,035 93.67
Title IV 574 536 93.38 817 403 49.33 818 743 90.83
Total 1,499 1,162 77.52 1,778 989 55.62 1,923 1,778 92.46
Justice
Title III 2,546 2,431 95.48 3,008 1,687 56.08 3,316 3,194 96.32
Title IV 140 140 100.00 200 200 100.00 200 200 100.00
Total 2,686 2,571 95.72 3,208 1,887 58.82 3,516 3,394 96.53
Total MTEF
Title III 39,345 36,974 93.97 53,236 26,827 50.39 83,299 80,714 96.90
Title IV 18,252 17,098 93.68 18,445 16,603 90.01 35,975 30,853 85.76
Total 57,597 54,072 93.88 71,681 43,430 60.59 119,274 111,567 93.54
81 Annex I (continued)
Table 2: Expenditure Allocation and Execution in Priority Sectors—
Deconcentrated (prefecture) Level (2001–02),* in GNF million
2001 2002
Alloc. Execution Alloc. Execution
% %
Education
Title III 22,287 11,124 49.91 24,042 22,974 95.56
Title IV 9,500 6,000 63.16 16,421 15,760 95.97
Total 31,787 17,124 53.87 40,463 38,734 95.73
Health
Title III 5,887 3,270 55.55 16,808 15,163 90.21
Title IV 3,946 1,800 45.62 12,212 12,153 99.52
Total 9,833 5,070 51.56 29,020 27,316 94.13
Rural
Title III 2,139 1,307 61.10 9,739 9,676 99.35
Title IV 382 319 83.51 457 456 99.78
Total 2,521 1,626 64.50 10,196 10,132 99.37
Road Fund
Title III 12,278 4,462 36.34 13,556 13,412 98.94
Title IV 0 0 0 0
Total 12,278 4,462 36.34 13,556 13,412 98.94
Urban Development & Housing
Title III 21 10 47.62 23 23 100.00
Title IV 0 0 0 0
Total 21 10 47.62 23 23 100.00
Social Welfare
Title III 99 70 70.71 107 102 95.33
Title IV 408 358 87.75 298 232 77.85
Total 507 428 84.42 405 334 82.47
Justice
Title III 2,248 1,229 54.67 2,358 2,356 99.92
Title IV 200 200 100.00 200 200 100.00
Total 2,448 1,429 58.37 2,558 2,556 99.92
Total MTEF
Title III 44,959 21,472 47.76 66,633 63,706 95.61
Title IV 14,436 8,677 60.11 29,588 28,801 97.34
Total 59,395 30,149 50.76 96,221 92,507 96.14
* Deconcentration of the budget went into effect 2001.
Annex I (continued) 82
Table 3: Proportion Represented by Deconcentrated Departments
(Prefecture Level) in the Allocation and Execution of Expenditures
in the Priority Sectors (%)
2001 2002
Deconc. Alloc./ Deconc. Exec./ Deconc. Alloc./ Deconc. Exec./
Total alloc. Total exec. Total alloc. Total exec.
Education
Title III 87.5 83.8 73.5 72.1
Title IV 83.9 53.7 92.1 92.2
Total 86.4 70.1 80.1 79.1
Health
Title III 93.2 67.5 84.5 80.5
Title IV 73.6 42.0 74.4 100.0
Total 84.2 55.5 79.9 88.2
Rural Dev.
Title III 66.4 89.9 80.5 80.8
Title IV 58.1 59.6 65.1 69.4
Total 65.0 81.7 79.7 80.2
Roads fund
Title III 87.6 92.2 97.6 99.3
Title IV 0.0
Total 87.1 92.2 97.6 99.3
Urban Dev.& Housing
Title III 8.4 6.9 7.6 7.7
Title IV
Total 8.4 6.9 7.6 7.7
Social Welfare
Title III 10.3 11.9 9.7 9.9
Title IV 49.9 88.8 36.4 31.2
Total 28.5 43.3 21.1 18.8
Justice
Title III 74.7 72.9 71.1 73.8
Title IV 100.00 100.00 100.00 100.00
Total 76.3 75.7 72.8 75.3
Total MTEF sect.
Title III 84.5 80.0 80.0 78.9
Title IV 78.3 52.3 82.2 93.3
Total 82.9 69.4 80.7 82.9
83 Annex I (continued)
Table 4: Share of Taxes and Levies Restored to Local Communities (%)
Taxes/levies 2000 2001 2002
Poll tax (Impôt minimum pour le dev. local,
IMDL) 100 100 100
Professional tax (Taxe profession-elle
unique, TPU) 50 80 80
Real estate tax (Contribution foncière
unique, CFU) 50 80 80
Motor vehicle tax (Taxe unique sur les
vehicules, TUV) 30 50 50
85 Annex J
OED Response to Government Comments
OED thanks Government officials for their detailed comments on the PPAR.
OED has redrafted the PPAR to address most of the Government’s concerns. In those
instances where Government perceptions differ from OED’s, footnotes have been added
in the main report quoting official views.
General Comments: All general comments have been reflected in the PPAR.
Comments of a Technical Nature: The report acknowledges that GDP has
grown by an average of almost 4 percent p.a. in real terms in the 1990s. However, per
capita growth has been modest and insufficient to reduce poverty. The reduction in civil
servants, increases in non-mining revenues and the deconcentration/decentralization of
the budget noted by the Government are impressive and the PPAR has been modified to
reflect these achievements. With respect to two specific comments:
1. The allocated share to priority sectors went from 28 percent in 1997 to 30.89
percent in 1998 and to 31.5 percent in 1999: The figures cited by the Government are the
budgeted figures which were not reflected in actual spending. Actual spending on
priority sectors declined from 43.2 percent of total spending in 1997, to 39.5 percent in
1998. Concerning non-wage recurrent expenditures, on which IDA put special emphasis,
actual spending on non-wage recurrent expenditures for the four priority sectors shrank
from 31.5 percent in 1997 to 24 percent of the total expenditures in 1998.
2. Under Titles III and IV, 38.4 percent of the budget was allocated to priority
sectors in 2001, and 43.3 percent in 2002, for respective totals of GNK 71.6 billion and
GNF 119.3 billion. Actual disbursements out of these allocations totaled GNF 54 billion
in 2001 and GNF 111.6 billion in 2002; these figures correspond to execution rates of 55
percent and 93.5 percent, respectively: The condition in the DCA stated that “35 percent
of total non-wage recurrent budget go to priority sectors.” According to the 2001 budget
law, the total non-wage recurrent expenditure was 347 billion francs. Therefore, SAC IV
DCA in 2001 required that the budget allocate at least 121.45 billion francs to the priority
sectors in 2001. According to the Government’s tables, the budget allocation for priority
sectors in 2001 was 71.6 billion francs which is well short of the DCA 35 percent
requirement. The objective of the loan was to increase the allocation of non-wage
recurrent expenditures to priority sectors. If the DCA condition as worded had been met,
an extra 50 billion francs would have been allocated for non-wage recurrent expenditures
in the priority sectors.